THE BUSINESS CYCLE UNIT 23

Recession in the news… US slips back into recession EU sees recession, record dole queues this year UN report predicts likely global economic downturn in 2013 LEAD-IN p. 114

/trɒf/ Growth- expansion, upturn Peak- GDP tops out Trough /trɔf/- economic activity bottoms out Recession- contraction /kən’trækʃən/, downturn The Business Cycle the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time (www.investopedia.com)

Viewing http://www.youtube.com/watch?v=EMHkiKxtlvw “a backwards rollercoaster” 3 indicators of recession by NBER definition of recession 4 phases economic trends in recession V-shaped recession v. U-shaped recession

Collocations: recession or expansion? businesses cut back on output unemployment rate goes up eventually* it reaches a trough. eventually it tops out consumers spend less money sales improve * at an unspecified later time, in the end economic activity picks up again businesses make fewer sales excess inventories are used up companies earn less revenue new orders are placed production is ramped up again job opportunities improve

Collocations: recession v. expansion economic activity picks up again sales improve excess inventories are used up new orders are placed production is ramped up again job opportunities improve unemployment rate comes down eventually it tops out economic activity slows down consumers spend less money businesses make fewer sales inventories build up companies earn less revenue fewer orders are placed businesses cut back on output unemployment rate goes up businesses reduce the number of people on payrolls eventually it reaches a trough

V-SHAPED OR U-SHAPED RECESSION? begins abruptly reaches a trough quickly recovers quickly slowdown lingers* takes a long time for activity to pick up again * to remain existent although often waning in strength, importance, or influence v U

What happens to GDP in a business cycle? READING (MK, p. 114,115) What happens to GDP in a business cycle? What happens during an upturn? (What tends to rise?) What is a boom? What happens during a downturn? (What falls?) What is the difference between a recession and a depression? (Synonyms?) What is the most probable cause of the business cycle? How do people behave in good times? And in bad times? How is investment connected with demand? How is internal theory different from external theory? What is creative destruction? Comprehension

IDEAS FOR MINI TALKS Joseph Schumpeter :economic ideas The Great Depression http://www.youtube.com/watch?v=VpKmfjf5tUk