Topic 1: Introduction to Economics Concept: The Business Cycle Year 11 Economics Topic 1: Introduction to Economics Concept: The Business Cycle

The Business Cycle The Business Cycle is a series of cycles which is characterised by 4 main phases: upswings, booms, downswings and troughs (which may lead to a recession) The business cycle maps the patterns of productive activity i.e. GDP per year

The Business Cycle Graphically the business cycle presents the changes in GDP within an economy It therefore highlights a series of fluctuations in the level of economic growth within an economy due to either domestic or international factors

During a Boom A boom refers to the increase in economic activity associated with increasing investment and production. It leads to increasing demand for labour and a fall in unemployment. Individuals disposable income increases and this leads to further consumption and therefore further economic expansion In this phase of the cycle expenditure, output, income and employment levels reach a maximum point as economic activity peaks. Shortages of labour and resources may occur leading to inflation

During a Recession A recession is the stage of the business cycle where there is decreasing economic activity defined as 2 consecutive quarters (6 months) of negative economic growth i.e. reduction in GDP In this phase of the cycle expenditure, output, income and employment opportunities reach a minimum point as economic activity troughs. Not all troughs lead to a recession

The Business Cycle

The US Business Cycle DOWNSWING BOOM UPSWING DOWNSWING TROUGH RECESSION

Impacts of the business cycle Recession Boom production of G&S levels of consumption and investment unemployment income levels quality of life

Business Cycle – You Tube Activity: Watch this animation and from your analysis, identify 5 characteristics of an upswing/boom and 5 characteristics of a downswing/recession http://www.youtube.com/watch?v=28Ejh7ylDbk