The Business Cycle, Inflation And the Actions of “The Fed” Fed Lowers rates to “energize” sluggish economy. Inventories at their lowest. Production in full swing. Workers making high incomes. Inventories of finished goods still lag demand. TOO MANY DOLLARS CHASING TOO FEW GOODS. UNEMPLOYMENT LOW. INFLATION HIGH. TOO FEW DOLLARS CHASING TOO MANY GOODS. UNEMPLOYMENT HIGH, INFLATION LOW. Layoffs and fears of an economic slowdown cause workers to spend less. Inventories still high. Fed raises rates to “cool” overheating economy. Companies cease expansion and borrowing. Layoffs of workers begin. Inventories reach highest levels. Companies borrow, hire more workers, expand operations. Inventories at their lowest.

Inflation = TOO MANY DOLLARS CHASING TOO FEW GOODS. The Fed = The Federal Reserve Banking System Fed

Demand: Rises and falls independently of supply. Supply: Fluctuations may be caused by environment or economy

SWOT: strengths, weaknesses, opportunities, threats