Chapter 3 Economic Activity in a Changing World 3.2 The Business Cycle

Guiding the Economy U.S. economy is shaped by a mix of public and private forces. The government spending of tax dollars effects the economy. The government takes certain steps to influence the economy.

Four Stages of the Business Cycle Business Cycle: the rise and fall of economic activity over time.  Prosperity  Recession  Depression  Recovery

Prosperity Prosperity: a peak in economic activity  Wages are higher  More income per worker  Unemployment rate is low.  Demand is high on most goods.

Recession Recession: when economic activity slows down.  Businesses produce less.  Workers are paid less or laid off.  Unemployment rate starts to increase.  Drop in GDP.

Depression Depression: a deep recession that affects the entire economy and lasts for several years.  Unemployment rate is high.  GDP is low  Few goods and services are available.  Stock market may “crash”.

Recovery Recovery: a rise in business activity after a recession or depression.  Unemployment rate begins to lower.  GDP starts to rise.  Demand for products and services is on the rise.  Innovation starts to occur.

Homework Complete Chapter 3-2 Reading Activity and 3-2 Graphic Organizer (Save to S:Drive) Review questions on page 47, 1-3