Business cycles Chapter 12

Economic cycles The economy undergoes periodic cycles of good times, then bad times, and then good times again. Economists try to predict what the economy will do in the future

Business Cycle A period of expansion followed by on of contraction Not minor day to day ups and downs, but major changes in GDP above or below normal levels

Phases of the Business cycle Expansion Peak Contraction trough

expansion A period of economic growth as measure by a rise in GDP Plentiful jobs Falling unemployment rate Businesses prosper

Peak The height of an economic expansion, when GDP stops rising

Contraction After reaching the peak Economic decline Falling GDP Unemployment rises

Trough (trawf) Lowest point in economic contraction GDP stops falling Begins a new period of expansion

Recession Gdp falls for two consecutive quarters (at least 6 months) Prolonged economic contraction Unemployment reaching 6-10%

depression Long and severe recession High unemployment and low economic output

Stagflation Decline of GDP combined with a rise in price level (inflation)

Your assignment How long was the recession What factors caused the recession What contributed to the recovery

Recessions 1945 1949 1953 1957 1960 1970 1980 1991 2001 2008