Business Cycle & U.S. Economy Economics-2015 Business Cycle & U.S. Economy Understanding the past & seeing the future!

Business Cycle GDP = C + I + G + (X-M) Economic systems go through periods of fast growth and slow growth called the Business Cycle The U.S. economy is currently growing only moderately (GDP = +2.1%) The U.S. is still “recovering” from the Great Recession of 2009 Worst economic period since the Great Depression (1929) GDP = C + I + G + (X-M)

Business Cycle Standard Pattern Peak Peak Trough Expanding Peak Expanding Trough Contracting |-------------------------GDP-------------------------| . |--------------------------------------Time--------------------------------------|

Recessions The U.S. enters a recession every 7-10 years 2 consecutive quarters of negative GDP is considered a recession Recessions typically last 16 months The Government attempts “to help” the economy during recessions Federal Government: by ↓ taxes & ↑ Gov’t Spending Federal Reserve: by ↓ short term interest rates Janet Yellen = current Chair of Fed

Business Cycle Worksheet GDP & Unemployment

Problems with U.S. Economy in 2015 U.S. is currently operating below PPF Curve (point B on PPF) Why below PPF? Unemployed workers (labor) Underemployment of Human Capital Declining Labor Force Participation Recessions in Europe Slow Growth in China A B

Alphabet Recoveries http://www.pbs.org/newshour/bb/business/jan-june09/econshape_06-23.html

Stock Market Cycles The Stock Market also goes through a “business cycle” Bull Markets = Over 20% rise from the trough Bear Market = Over 20% fall from the peak

Stock Market Correction? http://www.npr.org/2015/08/27/435273159/stock-markets-sudden-correction-might-not-impact-most-americans