Business Cycles, Recessions, and Depressions

          It is difficult for economists to predict the business cycle for many reasons.  One reason being that periods of expansion and recession are unavoidable and "driven in great part by a tug-of-war between expectations and reality" (2 Ip).  Business cycles are also heavily reliant on market cycles making them extremely susceptible to frequent change.  The business economy is largely about determining how people will react to certain things and that's hard enough to determine in just regular day to day life let alone when it comes to the future of businesses.  Businesses make these plans based on how much they expect their sales to grow, making these decisions just as dependent "on gut feelings as cold calculations" (2 Ip).  Business cycles are tough to predict.
          A bull market and a bear market contrast each other. A bull market is when the market appears to be in a long-term incline and a bear market is when the market appears to be in a long term decline.  A bull market tends to develop when the economy is strong, the unemployment rate is low, and inflation is under control.  A bear market is most likely to occur when unemployment is high and inflations is rising.  Bear markets are also "more violent than bull markets and the unemployment rises more quickly than it falls" (2 Ip).

          Imbalances have occurred throughout history causing these economic patterns.  Things such as crop failures and band panics were known as natural disasters during the nineteenth century in America.  A spike in oil prices is what caused these changes in 1973 and 1990.  Many believe that "if we could just inoculate ourselves against past imbalances then we could eliminate recessions" (3 Ip), however, this is not true because these imbalances come in many different forms and it is impossible to protect ourselves against all of them.
          A recession and a depressions often go hand in hand.  A recession is defined as two consecutive quarters in which real  gross domestic product falls.  A depression is described as a severe and prolonged recession.  A recession is mainly considered a depression when real gross domestic product falls for more than two consecutive quarters and when the "economy's normal recuperative mechanism fails to engage" (4 Ip).  A recession more often than not, leads to a depression.