Business Cycle

The economy does not grow at a constant rate, instead it goes through alternating periods of growth and decline

Gross Domestic Product (GDP) A measure of the economy’s output All the money that is spent on cars, apples, CD’s, haircuts, movies, and everything else that is bought and sold in a country in one year Final $ value of all goods and services produced in a year

Expansion A speedup in the pace of economic activity

Recovery Period of expansion up to the previous peak in the business cycle

Peak/Prosperity The upward turning of the business cycle, highest point of the “boom” The highest point of the expansion

Recession Slow down in economic activity marked by less consumer spending and higher unemployment May involve falling prices which can lead to a depression or sharply rising prices which is called stagflation Completely normal to have

Depression Sustained downturn in the GDP Marked by low production and sales along with high business failures and unemployment

Trough The lower turning point of the business cycle This is where recession or depression turns into an expansion

Economic Indicators

Per Capita GDP Average of how much a person produces in one year GDP/number of people living in the country Population makes a HUGE difference

Standard of Living Measured by income level/wealth Quality of housing and food Medical care Educational Opportunities Transportation Welfare Programs/ Poverty

Consumer Price Index (CPI) AKA—”Cost of living” Index Gov’t uses household items that are bought every day to measure how much prices are going up or down With the change in prices they can determine inflation!

Producer Price Index (PPI) Measures changes in wholesale prices of goods, not the final consumer price

National Debt Money that is owed by the government This actually happens at every level of the government

Stock Market Ups and downs in the market can cause optimism or pessimism in the purchasing done by consumers— thus effecting the economy as a whole