Business Cycles Peaks and Troughs… Expansion and Recession, the ups and downs of economic activity.

Expansion and Recession Expansion - A period of investment, production and increases in sales and business activity.Expansion - A period of investment, production and increases in sales and business activity. “Peak” – the point where expansion stops, and overall business activity begins to slow.“Peak” – the point where expansion stops, and overall business activity begins to slow. Recession – a period of decline in economic activity marked by a reduction in real GDP for 6 months – (2 1/4s).Recession – a period of decline in economic activity marked by a reduction in real GDP for 6 months – (2 1/4s). “Trough” - The point where real GDP stops going down.“Trough” - The point where real GDP stops going down.

“Fueling” Expansion How could the following factors cause US businesses to expand? Foreign Investment The Government Competition Consumers World Events

Graphs of Peaks and Troughs Go to Page 311 in the textbook, to investigate the nature of business activity in the US.

Predicting Business Cycles Index of Leading Economic Indicators Average workweek (manufacturing) Initial unemployment claims New orders for consumer goods Vendor performance (Purchasing Managers) Plant and equipment orders Building permits Change in unfilled durable orders Stock prices (S&P 500) Real M2 (Money, Chk. & Sav., some CDs, $ funds ) Index of consumer expectations (Confidence)

Homework – Due 5/2 Posted on the Web Site Under the Calendar for 4/30 Chapter 15 Review – Page 390 Applying Economic Concepts Go to: Scroll down to “Leading Indicators”, and read the report, then, answer Question # 1 above.