Business Cycles, Inflation, Recession and Depression.

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Presentation transcript:

Business Cycles, Inflation, Recession and Depression

 The increase in the amount of goods and services in a country  It is measured every year  Total dollar value of all goods and services is added up  Called: Gross National Product or GNP  This flow of money is necessary for a healthy economy

 It can grow if there is: ◦ A large supply of natural resources ◦ A steady growth in population ◦ A free enterprise system where people can find jobs and succeed in their work

 It is irregular changes in the level of total output measured by real GDP  GDP is gross domestic product: the total dollar value of all FINAL goods and services produced in a year  There are fluctuations in the economy: ups and downs in the economy (unemployment, inflation)

 1 st - Prosperity: most people have jobs, spending is high, businesses grow  2 nd - Recession: gradual slowdown due to less spending and lack of jobs  3 rd - Depression: if recession continues and people lost jobs. Ex: Great Depression  4 th - Recovery: jobs become available, people spend, business improves  5 th - Inflation: prices rise quickly, but incomes do not rise as fast

 Questions to thing about:  What person possessions contribute to your standard of living?  What would happen if prices of the items began to rise faster than your income?  This is how inflation affects you:  Inflation: causes prices to rise to a point at which people cannot afford to buy, or may delay buying certain products

 Merchants can’t sell their goods  1. Consumers can’t buy  2. Sales and profits decline  3. Production declines, layoffs occur and some businesses have to close  4. Interest rates rise (go up with everything else)