The Economy’s Cycle

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Quarterly, Seasonally Adjusted Annual Rate, GDPC96 from FRED.
Gross domestic product (GDP), the featured measure of U.S. output, is the market value of the goods and services produced by labor and property located in the United States. Above is the GDP of the USA from 1947 Q1 to 2015 Q2.

Check out all of the numbers on the interactive graph by clicking here.

As you can see, the USA has been getting much more productive. The gray areas indicate on the graph recessions, which are periods of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

The economy follows a cycle, which includes peaks & troughs of the economy. The general way things have gone are as follows (reference the drawing below):

  1. The economy is booming and growing
  2. After some time of the growth, the economy hits a peak
  3. After the peak, the economy slows & enters a recession where GDP is lower than the quarter previous
  4. The economy recovers after a trough and begins the recovery & boom stage again
  5. In the recovery stage, the economy is growing back to the level before the recession
  6. After the recovery stage, growing beyond the recession, we are reaching levels we never have before

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Check out this illustrated in FRED:

fredgraph

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