What is the Economic Cycle?

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Presentation transcript:

The Trade/Economic/Business Cycle The characteristics of slump, growth, boom and recession

What is the Economic Cycle? A line graph illustrating fluctuations in GDP (gross domestic product) over a period of time. The fluctuations are referred to as periods of growth, boom, recession and slump in GDP. These periods exhibit a range of characteristics with regards to inflation, unemployment, interest rates, wages and retail sales.

What is GDP? http://www.bbc.co.uk/news/10613201

The economic cycle GDP Trend rate of growth (2%) Actual rate of growth Time Negative output gap Positive output gap

The economic cycle Points 1-3 refers to a contracting/shrinking economy and recession if this is recorded for 2 quarters Points 1-2 show recession above the TRG Points 2-3 show recession below the TRG Point 3 is known as a period of slump or ‘stagnant’ economy Points 3-5 refers to an expanding economy and growth if this is recorded for 2 quarters Points 3-4 show growth below the TRG Points 4-5 show growth above the TRG Point 5 is known as a period of boom or an economy that is ‘overheating’

Characteristics of Slump, Growth Boom and Recession Highest, lowest, rising, falling Inflation Interest Rates Unemployment Wages Retail Sales Slump Growth Boom Recession

Characteristics of Slump, Growth Boom and Recession Inflation Interest Rates Unemployment Wages Retail Sales Slump Low levels and little inflationary pressure Lowest rates of interest Highest levels of people out of work No rises and potentially a cut in wages for non key workers Lowest levels of spending Growth Rising inflationary pressure. Inflation likely to rise Tendency for interest rates to rise Unemployment rates starting to fall A gradual rise, particularly in sectors where growth is experienced Rising sales levels Boom Higher levels of inflation and pressure to rise still further Highest rates of interest with the potential to rise still further Potentially lowest levels of unemployment High rates particularly in growth areas Highest levels o spending Recession A reduction in inflationary pressure. Inflation likely to fall Falling interest rates Unemployment rates starting to rise No more rises and sectors slowing down may experience a cut in wages Falling sales levels

Multiple choice qns June 2013, qn24 June 2012, qn3 June 2012, qn4

Homework Friday 27/01/2017 Create an Economic Cycle Revision Map.