1. Chapter 10 (Pg 236) April 13 2010

3. Expansion- a period of economic expansion and growth. Economic activity is increasing. Peak- Expansions eventually hit a peak, a peak is the highest point of the graph. Highest most prosperous point. Contraction- (recession) business enters into a slowdown. (or GDP stops increasing) A depression is a prolonged and severe recession, such as the great depression of the 1930’s. Trough- final stage, occurs when supply, demand, and production reach its lowest points.

4. There are three way of predicting as closely as you can the graph of your business, they are: - leading indicators -coincident indicators - lagging indicators

5. Leading Indicators: When attempting to predict changes economists examine leading coefficients, which anticipate the direction in which the economy is going. This set of economic factors anticipate the expansions and contractions of the business cycle from one month up to two years before similar changes in overall economics activity occurs. Coincident Indicators: These show the current status of the economy. These change as the economy moves from one phase to the next. They move up or down with the overall economy. Lagging Indicators: These factors help predict the duration of economic upturns or downturns. These changes occur months after an upturn or downturn in the economy.

6. Business Investment Businesses invest in capital goods such as new machinery to increase their production. Lots of investment promote expansion in the business cycle Money and Credit The availability of money and credit also affects the cycle. The amount of money in circulation depends mainly on government policies. Public Expectations Expectations about future economic conditions can shape current economic behavior. External Factors Changes in the world’s economic or political climate also affect the cycle, like war.

7. Companies are born Companies Die The Market Economy moves forward (The Natural Business Cycle)

8. 1. Now draw the Business Cycle Graph 2. Find a business that is in each stage of the cycle and explain why they are in that stage. 3. Also write a small definition of each word: Expansion, Peak, Contraction, Trough