Life Within the Business Cycle Target: I can identify the four parts of the business cycle and what signs let me know a change might happen.

Business Cycle The repeated rise and fall of economic activity over time

Business Cycle The repeated rise and fall of economic activity over time The Business Cycle is divided into four sections: (graph on next slide) –Expansion –Peak –Contraction –Trough

Four Sections of Business Cycle Expansion Peak Contraction Trough

Recessions occur in the lower part of this process

In a recession, producers of durable goods are hurt the most

Recessions occur in the lower part of this process In a recession, producers of durable goods are hurt the most –A product that has an expected life span of several years, and tend to be relatively expensive

Recessions occur in the lower part of this process In a recession, producers of durable goods are hurt the most –A product that has an expected life span of several years, and tend to be relatively expensive –Ex. Cars, appliances, furniture

Recessions occur in the lower part of this process Nondurable goods do not change as greatly in a recession

Recessions occur in the lower part of this process Nondurable goods do not change as greatly in a recession –Goods that are intended for immediate use and are less expensive

Recessions occur in the lower part of this process Nondurable goods do not change as greatly in a recession –Goods that are intended for immediate use and are less expensive –Ex. Food and clothing

Forecasting the Cycle The department of commerce will issue reports that warn of leading indicators

Forecasting the Cycle The department of commerce will issue reports that warn of leading indicators –These are signs that the economy may undergo a change

Forecasting the Cycle The department of commerce will issue reports that warn of leading indicators –These are signs that the economy may undergo a change They monitor things like: building permits, store inventories, orders for new goods

Forecasting the Cycle The department of commerce will issue reports that warn of leading indicators –These are signs that the economy may undergo a change They monitor things like: building permits, store inventories, orders for new goods –If a store has to order new goods, it is a sign that the economy is improving

Forecasting the Cycle This info is very important to businesses because it may change the way that they do business –Ex. If a down-turn is predicted they will not hire

Forecasting the Cycle This info is very important to businesses because it may change the way that they do business –Ex. If a down-turn is predicted they will not hire However, there is no guarantee from these indicators