Business Conditions Analysis (1) Essay Example | Topics and Well Written Essays - 500 words

Business Conditions Analysis (1) - Essay Example During this time span, there is considerable amount of decline or downfall in the economic activities. On the other hand, the definition of expansion, which is used by the committee, is that it is the time span between the trough and peak of the economic cycle. During this time span, the economic activities increase by a considerable rate (NBER(a)). The method used by the committee for determining the dates of the important events of the business cycle is inefficient in terms of identifying temporary shifts in the recession and expansion. As, the committee only take its decisions on the basis of the pre-defined definitions and has no method of identifying that the contraction or expansion are only temporary interruptions or actual (NBER(a)). Along with this, there is no appropriate definition of economic activity. For this purpose, the committee takes help from different economic measures which are used to determine the overall broad activity. Some of these measures, which are used by the committee, are product based real Gross Domestic Product (GDP), income based real Gross Domestic Product (GDP), and the real income of the economy (NBER(a)). Apart from these broad economic indicators, Business Cycle Dating Committee also sometime uses the narrow economic indicators which are not able to cover the whole economy, for example the industrial production determine by the index of the Federal Reserve and the real sales. Although, use of these narrow economic indicators along with the broad economic indicators can result in the problem of double counting the of the industries and sectors included in both indicators but still these narrow economic indicators can be beneficial when there is conflict between the broad indicators (NBER(a)). It is also important to establish, that the method used by the committee for the determining peaks and troughs is completely different from the two