1. Business Fluctuations
Causes and Indicators Ch. 13.5

2. Understanding Fluctuations
What might cause the Business cycle to expand and contract?
Why is it important to know and understand the causes of fluctuation?

3. Causes of Fluctuations
Business Investments
Business decisions that include the expansion or contraction on their capital investment
Innovations
Inventions and new productions techniques

4. Causes Cont… Government Activity Affects business cycle through..
taxing and spending
control of the money supply

5. Causes Cont.. External Factors
Factors outside of a nation’s economy affect the business cycle.

6. Causes Cont.. Psychological Factors
People’s reactions to events that may cause contraction or recovery

7. Economic Indicators
Stats that measure variables in economy used to learn about the current and future state of the economy
Leading indicators
Stats that point to what will happen in economy.
Coincident indicators
Economic indicators that change at the same time as changes in overall business activity
Lagging indicators
Indicators that seem to lag behind changes in overall business activity

8. Leading Indicators Examples
Average weekly hours for production workers
Weekly claims for unemployment
Number of building permits issued for private housing
Stock Prices
Changes in Consumer Expectations

9. Coincident Indicators
Examples
Personal income minus transfer payments
Rate of industrial production
Sales of manufacturers, wholesalers, and retailers
# of non-agricultural employed

10. Lagging Indicators Examples Average Length of unemployment
Labor cost per unit of output
# of industrial and commercial loans to be repaid
Ratio of consumer debt to personal income