8.3 Business Cycle Identify phases of the business cycle and the economic indicators used to measure economic activities and trends.

Essential Questions How are economic indicators used to measure trends in the economy? Which aspects of the business cycle are prime for investment and which ones signal a slow down? How do producers and consumers impact the rise and fall of the business cycle?

Economic Change The American economy always changes. To help the economy, the government regularly measures and compares its performance to other years.

The Business Cycle Expansion Peak Contraction Trough

The Business cycle: “the ups and downs of the economy.” Peak P Expansion Contraction C E Trough

Expansion Also known as Recovery The economy is growing. Consumers buy more goods. More jobs available.

Peak Also known as Prosperity. Businesses work at full capacity. Stores are selling at record amounts. Employment is very high and unemployment is very low.

Contraction Also known as Recession. Business slowly declines. Sales go down. Workers getting laid off.

The Government has been slow to admit our current RECESSION The Government has been slow to admit our current RECESSION. As of December 2007, there is no hiding it.

The Downward Spiral

Trough Also known as Depression. Production very low. Unemployment very high. A very long and bad recession is called a depression.

Economic Indicators Standard of living Gross Domestic Product (GDP) Per Capita GDP Consumer Price Index (CPI) Recession Depression National Debt

Standard of Living Economic indicators show our standard of living. Standard of living refers to our quality of life based on amount of products available. It is used by our government to see how the economy is doing. The US has a very high standard of living. Is Donald Trump’s standard of living higher or lower than yours?

Standard of Living around the world

Gross Domestic Product (GDP) The main economic indicator It is the total value (in dollars) of everything produced in the USA each year. It tells how much is available and how much we are spending.

GDP by country last year: The World and GDP GDP by country last year: 1st – USA $16.8 trillion 2nd – China $9.2 trillion 3rd – Japan $4.9 trillion 4th – Germany $3.7 trillion 5th – France $2.8 trillion

Per Capita GDP Per capita GDP divides the total GDP by the population. This shows GDP per person. By showing per capita GDP, we can judge a country’s success with that of another country. Most countries with the highest per capita GDP have market economies.

The World and per Capita GDP PC GDP by country last year: 1st – Qatar 2nd – Luxembourg 3rd – Singapore 4th – Kuwait 10th – USA

Consumer Price Index (CPI) To keep track of inflation, the government samples prices every month for about 400 products commonly used by consumers. The prices of these items make up the Consumer Price Index (CPI), which is the popular measure of price. Typically, some prices will go up while some go down. However, the change in the average level of prices as measured by the CPI determines the rate of inflation.

Recession and Depression A recession takes place when real GDP goes down for six straight months. An average recession lasts about one year. Recessions are painful times. The economy declines, and many people lose their jobs. A depression is a very bad and long recession.

National Debt The National Debt is the amount of money owed by the federal government. As the government represents the people, government debt can be seen as an indirect debt of the taxpayers. The debt in the United States is roughly $18.6 trillion. Trillion, Trillion, Trillion!!!!!!

The National Debt is still climbing!