DO NOW Pick up today’s handouts Quiz—Open Notes- Turn in to the tray After quiz: 1. Go to Google Classroom- watch EconMovie & do top of notes 2. Business Cycle WS- “Before the Lesson”-Keep

I can identify and describe the four stages of the business cycle. Ch. 13.5 The Business Cycle Essential Questions: How does the government intervene in the economy? How does it know when to intervene? Learning Target: I can identify and describe the four stages of the business cycle. I will show I understand by completing a GDP analysis handout.

GDP Review & Business Cycle Preview Click here! (We’ll get to fiscal policy later in this unit…)

The Business Cycle Recurring periods of growth and decline in economic activity is referred to as the business cycle. The cycle has four phases: EXPANSION PEAK CONTRACTION TROUGH

The Business Cycle Peak Peak Contraction Expansion Expansion Trough

Expansion—a period of economic growth Peak—the point at which an expansion ends Contraction—a period of economic decline, marked by falling GDP and rising unemployment Trough—the end of a contraction, where once the economy’s “hits bottom,” new expansion begins

It’s all Cyclical… The term “cycle” can make you think there is a consistency to them… But, business cycles are irregular…in both length or severity.

The business cycle can indicate changes in the economy… Economists can look at the business cycle to either: forecast or confirm changes in the economy

Leading Indicators Leading indicators are used to forecast the peaks and troughs of a business cycle For examples, new home construction can show the peak or trough of an economy

Coincidental Indicators Coincidental indicators are measures that consistently rise or fall along with expansions or contractions For examples, real GDP change from month to month indicates either an expanding or shrinking economy

Lagging Indicators Economists use lagging indicators to confirm that one phase of the business cycle has ended and another has begun Unemployment is one of the most important

Business cycles are known as periods of “boom” and “bust”

Businesses & Consumers A key characteristic of a growing economy is an increase in business investment. Think about it…if a business has the revenue to invest in its own growth, or if investors have the extra money to invest…the economy is growing. Consumer confidence is typically high during an expansion. Think about it…if the economy is growing, consumers aren’t afraid to spend or invest…

Recession a decline in economic activity lasting at least six months— shown in a fall in real GDP, wages, employment, profits, and production. These things can PUSH an economy into a recession: 1. A negative shock to the economy—examples: rapidly rising oil prices, terrorist attack, or stock market crash.

Recession 2. A rise in interest rates—makes it harder for consumers and companies to borrow money.

Recession 3. A shortages of raw materials—can cause price to rise—remember, cost-push inflation??

Depression A prolonged economic downturn characterized by a plunging real GDP and extremely high unemployment. Americans have suffered through several depressions, with the Great Depression of the 1930s being the worst.

Why should I care??? The ups and downs of the business cycle may hold little interest for you at this point in your life. This is likely to change once you enter the job market. Should you start looking for work during an expansion, you may find many employers eager to hire you, but if you find yourself entering the workforce during a contraction…

Exit Tickets Complete #11-13 on your GDP Review WS. At the bottom of your notes, create an analogy for each phase of the business cycle… The EXPANSION in a business cycle is like…because… The PEAK in a business cycle is like…because… The CONTRACTION in a business cycle is like…because… The TROUGH in a business cycle is like…because…