The Shape of a Recession. Big Questions How are we doing? (Yes, again) Why do recessions happen? How does the government affect the economy (and you and.

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Presentation transcript:

The Shape of a Recession

Big Questions How are we doing? (Yes, again) Why do recessions happen? How does the government affect the economy (and you and me)?

Chapter 14: Economic Instability Section 1: The Business Cycle

The Business Cycle Phases: Recession, Expansion, Peak, Trough RGDP Time

The Business Cycle

Output Gap Link

The Business Cycle Business cycle = systematic ups and downs of real GDP 2 phases of biz. cycle: Recession begins at peak and ends at trough— peak/trough at least 6 mo’s apart Expansion is the recovery from a recession Severe recessions can become depressions.

Real GDP ‘75-’10

Directions: Color vertical stripes representing recession years. Color Key- Recession ______ Expansion white At the top of the graph, label the Peaks (P) and the Troughs (T). P

List of recessions

16 Recessions Since 1919 That’s an average of one every 6 years. (They’ve become less frequent since 1919.)

Causes Businesses –By predicting recessions they can cause and/or prolong recessions! Consumers –cause “bubbles” (housing, etc.) –save money when they get scared. This makes recessions last longer!

II. Causes The tulip-bulb bubble.

II. Causes The dot-com bubble.

II. Causes Federal Reserve

U.S. Real Gross Domestic Product Great Depression World War II Oil Prices Quadruple/ Vietnam War Great Recession dot coms, 9/11 Iranian Revolution Fed Raises Interest Rates to Fight Inflation Double Dip Oil, debt, and bank reg’s “tight” monetary policy

Business Cycle Art Draw a business cycle and label it appropriately (peaks, troughs, expansions, recessions). Along the business cycle, draw pictures/people/symbols showing: –what’s happening in the economy. –how people are feeling at each stage. –what the government may be doing. –what businesses may be doing.

Real GDP ‘75-’10

% Change, Consumer Price Index

Green bars indicate beginning of recessions.

Directions: Color vertical stripes representing recession years. Color Key- Recession ______ Expansion white At the top of the graph, label the Peaks (P) and the Troughs (T). P

The business cycle, unemployment, and inflation. An Activity

Hayek, Keynes Rap Battle