1. BUSINESS CYCLE
NOTES

2. Key Terms
1. monopoly – only have one supplier of a product (no competition)
2. oligopoly – a FEW competitors control the product
3. perfect competition – many suppliers of a product
4. public monopoly – a natural or legal monopoly regulated by gov’t (Ex: progress energy – electric)
5. anti-trust laws – laws designed to prevent monopolies (Sherman anti-trust Act)
6. Business cycle – the ups and downs of the economy
7. recession – a 6 month economic decline (2 quarters)
8. depression – a major economic slowdown (high unemployment)
9. inflation – a general rise in prices (value of dollar goes down)

3. I. How we measure economy
A. national income – total amount of money earned by all citizens
B. personal income – the amount earned by an individual (per capita income = national income divided by population)
C. Gross Domestic Product (GDP) – the $ amount of goods and services produced annually within a countries borders
D. Gross National Product (GNP) – the $ amount of goods and services produced inside and outside the countries borders

4. II. What causes business cycle to go up and down
A. Investment
1. increased investment = stronger economy
2. decreased investment = weaker economy
B. Government involvement
1. slow economy may mean less taxes and more gov’t spending
2. stronger economy may mean more taxes and less gov’t spending
*** these are examples of fiscal policy (gov’t spending)
C. external factors – things out of our control (natural disasters or wars)
1. wars can be a burden to the economy because of the debt; in the past, wars have stimulated the economy by providing jobs
2. natural disasters such as Katrina can have a negative effect on an economy
D. psychological factors – how much consumer confidence do we have in the economy? (Ex: y2k; 9/11; 2008)
1. less confidence = less spending = slow econ.
2. More confidence = more spending = strong econ.

5. III. Unemployment and the business cycle (look on board)