Business Cycle Unit 4 Macroeconomics

By the end of this lesson you should know…. Essential Questions How are unemployment, inflation and economic growth illustrated in the business cycle? Georgia Performance Standard SSEMA1 The student will illustrate the means by which economic activity is measured. a. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. e. Define the stages of the business cycle, as well as recession and depression. f. Describe the difference between the national debt and government deficits. Terms Peak Trough Recession Depression Expansion Contraction Business Cycle Literacy Standards RH.11-12.2 Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas RH.11-12.3 Evaluate various explanations for actions or events and determine which explanation best accords with textual evidence, acknowledging where the text leaves matters uncertain WHST.11-12.9 Draw evidence from informational texts to support analysis, reflection, and research.

What is the business cycle? The business cycle is a graphic representation of the ups and downs of the economy. Peak Contraction Expansion

What is the business cycle? Economists use data from Gross Domestic Product and plot points on a graph to create the Business Cycle. The business cycle is divided into four phases Peak Contraction Trough Expansion

The Phases of the Business Cycle Peak- at this point Real GDP stops increasing Contraction- this is a period where Real GDP in getting smaller. Contraction that lasts for more than two quarters is called a recession A particularly long and severe recession is called a depression Peak Contraction

The Phases of the Business Cycle Trough- this is the point where the contraction period has ended and the economy is at its lowest point Expansion- during this period the economy is experiencing growth Expansion Trough

How are employment and prices connected? Quick Write Think about what it means with real GDP changes. Explain what would happen with unemployment and prices at each stage of the business cycle. Peak Contraction Trough Expansion

How are employment and prices connected? Peak- unemployment is at its lowest, prices are at their highest Contraction- decreasing prices, increasing unemployment Trough- unemployment is at its highest, prices are at their lowest Expansion- increasing prices, decreasing unemployment

Can you identify and describe each phase?

Where are we today? Class Discussion Based on this data, determine where you think we are in the business cycle today. US Inflation Calculator http://www.usinflationcalculator.com/inflation/current-inflation-rates/ US Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/empsit.pdf

Now you should be able to… Answer these Questions How are unemployment, inflation and economic growth illustrated in the business cycle? Perform these Standards Illustrate the means by which economic activity is measured. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. Define the stages of the business cycle, as well as recession and depression. Define these Terms Peak Trough Recession Depression Expansion Contraction Business Cycle Sample Questions

What would you conclude about an economy characterized by increasing real gross domestic product (GDP), low unemployment, and increasing inflationary pressures? This economy is in a slowdown. The government needs to address the unemployment problem. This economy is in the expansion phase of a business cycle. The Federal Reserve should expand the money supply. Over a two-year period, the nation of Parthia experiences a steep decline in unemployment rate, a rise in real GDP, and a stabilized price level. Parthia appears to be at the start of a recession in the middle of a depression stagnating economically in the middle of a boom period

Answer Key D C

Resources US Bureau of Labor Statistics News Release July 2012 http://www.bls.gov/news.release/pdf/empsit.pdf US Inflation Calculator http://www.usinflationcalculator.com/inflation/current-inflation-rates/ Economics Help http://www.economicshelp.org/blog/4689/economics/uk-economy-2012-forecasts/ Georgia Department of Education’s Economics/Business/Free Enterprise EOC Assessment Guide http://www.gadoe.org/Curriculum-Instruction-and-Assessment/Assessment/Documents/Milestones/Assessment%20Guides/GM%20Economics%20EOC%20Assessment%20Guide%20081715.pdf

Resources Economics GPS Frameworks: Unit 4- “The Government and the Economy: Superhero or Villain” https://www.georgiastandards.org/Frameworks/GSO%20Frameworks/Economics%20Unit%204.pdf Georgia Department of Education Released EOCT’s and answer keys http://www.doe.k12.ga.us/Curriculum-Instruction-and-Assessment/Assessment/Pages/EOCT-Released-Tests.aspx