The Business Cycle Measuring the Economy. Business Cycle  Business Cycle - Economic pattern in which an economy goes through periods of prosperity and.

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Presentation transcript:

The Business Cycle Measuring the Economy

Business Cycle  Business Cycle - Economic pattern in which an economy goes through periods of prosperity and depression. (Ups and Downs) Peak Recession Depression Expansion Peak Recession

Business Cycle Business is great Jobs are plentiful Profits are high Most people have jobs Businesses are doing well High unemployment Less demand for goods (no one has money) Economy slows Businesses start to fail Unemployment rises Depression Peak Recession Expansion

Business Cycle Business is great Jobs are plentiful Profits are high Most people have jobs Businesses are doing well High unemployment Less demand for goods (no one has money) Economy slows Businesses start to fail Unemployment rises __________

Review – The Business Cycle GDPCPIInflation RecessionExpansionPeak DepressionUnemploymentBusiness Cycle

2 problems that occur in the business cycle 1. Inflation (Expansion and Peak)  Increase in prices  NEED TO SLOW DOWN ECONOMY  too much money in circulation 2. Recession (Towards depression)  When the economy is on a down slope  NEED TO SPEED UP ECONOMY  not enough money in circulation

Three Ways to Measure the Economy How do we know where we are on the business cycle?

1 -Gross Domestic Product (GDP)  GDP measures the value of all goods and services produced in the country in one year.

2 - Unemployment Rate  Percent of people out of work

Consumer Price Index (CPI)  CPI measures the change in prices. INFLATION  Rise in prices  Through the CPI, the government monitors the price of:  Housing  Medical Care  Food  Entertainment  Transportation  Clothing

 Problem with INFLATION –  When inflation occurs, the value of your money goes down and it takes more money to buy things.  The same is true for the economy and money. If the government printed more and more money then there is more money is in circulation ( in people’s hands) causing the value of a dollar goes down.