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Econ 101 home What is "The Economy"? What do economists do? Models Cycles Microeconomics and Macroeconomics Learn from the Shipwreck After the Shipwreck Production Shocks on the Island A Second Survivor ...And More Shifts in Production Impacts Capital Business Cycles Government Another Island |
Cycles, Leading variables, lagging variables
In the long term series of GDP output, two main things are noticeable: one is that output has been increasing steadily over the last 50 years. However, it wiggles up and down from one year to the other. We can break down this series into a trend (long term growth), taking away the wiggles, and in cycles, taking away the trend.  
Information most often reported in the news relates to cycles. The question we are concerned with is how the economy, represented by output, will evolve in the next few months. More rarely do we wonder what is going to happen in fifty years. Of course, one question is not independent of the other. For instance, today's decisions in government spending could affect the economy in the long term (in the case of Belgium: huge government debt of the 70s influences the economic process now). Although there are important interdependencies, we will focus on the cycles, at least for now. 
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