Economics: Unit 5: Lesson 1 Diagnosing the Economy: Performance

What is an economy?

What is GDP? GDP is an important indicator to the flow of the economy because it is the amount of money spent or earned in a country in an entire year.

Expenditure Approach One method used to calculate GDP is to estimate the annual expenditures on four categories of final goods and services:

Income Approach Another method calculates GDP by adding up all the incomes in the economy.

What is a business cycle? Business cycles show how well goods and services are flowing in an economy. The business cycle consists of four phases: Expansion Peak Contraction Trough Checkpoint Answer: Expansion, peak, contraction, and trough

Contractions There are three types of contractions, each with different characteristics. A recession is a prolonged economic contraction that generally lasts form 6 to 18 months and is marked by a high unemployment rate. A depression is a recession that is especially long and severe characterized by high unemployment and low economic output. Stagflation is a decline in real GDP combined with a rise in price level, or inflation.

Variables Affecting Business Cycles Interest Rates and Credit Consumers often use credit to buy new cars, home, electronics, and vacations. If the interest rates on these goods rise, consumers are less likely to buy them. Consumer Expectations High consumer confidence, though, will lead to people buying more goods, pushing up GDP. External Shock Negative external shocks, like war breaking out in a country where U.S. banks and businesses have invested heavily, can have a great effect on business, causing GDP to decline Business Investment When the economy is expanding, business investment increases, which in turn increases GDP and helps maintain the expansion.

Econ Ed Link – Business Cycle Quiz

Rotation Activity When I say go, you will form a pod with your assigned rotating groups. I will hand out the first activity. After 7 minutes, you will add your activity to your rotation packet and move to the next activity. (Leave any extra activity sheets at the pod.) We will complete three rotations and discuss the various sections as a class. Groups will be graded based on the activities kept in the rotation packet.

2nd Period Rotating Groups Group 1: Kevonte, Reagan, Navaja, Zach Group 2: Khaleigha, Cari, Tanisha, Cassidy Group 3: DaKorvian, Brendan, Izzy, Ashlee Group 4: Hannah, Ariel, Aaron, Alexa, Mariah Group 5: Darrion, Kristian, Nathan, Ashley, Chandera Group 6: Alexa, Danny, D’Marco, TyJae Group 7: Trenton, Savasia, Tyler, Bry’Andria

8th Period Rotating Groups Group 1: Jordan, Gage Group 2: John, William Group 3: Mariah, Kelsey Group 4: Hannah, Elizabeth Group 5: Warrick, Jason Group 6: Daivanda, Cherita, Jasmine

5th Period Rotating Groups Group 1: Jordyn, Haley, Emily, Megan Group 2: Nautica, Janay, Devon, Adam Group 3: Chad, Keanon, Brianna, Ashley Group 4: Idarrion, Brittney, Hannah, Carrington Group 5: Alexis M, Perry, Emily, Damon, DeAngelo Group 6: Azairiyia, Austin, Alexis B, Asia, Colin Group 7: Aireon, Alysa, Emonyae, Celeste

Business Cycle Rotation Discussion What did you learn?

Business Cycle Forecasting Checkpoint: Why is it difficult to predict business cycles? To predict the next phase of a business cycle, forecasters must anticipate movements in real GDP before they occur. Economists use leading indicators to help them make these predictions. Checkpoint Answer: Economists must anticipate movements in real GDP before they occur.

Economic Indicators Stock Market Income and Wages Manufacturing Activity Inventory Levels of Businesses Retail Sales Building Permits Housing Market Level of New Business Startups Changes in GDP Income and Wages Unemployment Rate Consumer Price Index(Inflation) Interest Rates Corporate Profits Balance of Trade Consumer Sentiment Federal Budget

Economic Indicator Presentation Assignment Economic Indicator Presentation