1. Unit 1.04
The Business Cycle
Measuring Economic Activity

2. The business cycle
Recurrent periods during which the nation’s economy moves in and out of recession and recovery phases
Major ups and downs of economy
Short Term (2-3 years)
Long Term (50-60 years)

3. Bull market Peaks Growing economy Increasing investor confidence
Anticipation of future price increases

4. Bear market
Troughs
General decline in the stock market over a period of time
Transition from high investor optimism to widespread investor fear and pessimism
price decline of 20% or more over at least a two-month period
sometimes referred to as "The Heifer Market"

5. prosperity
A phase of the business cycle where most people who want to work are working and businesses produce goods & services in record numbers.
Economic Growth
$200B in war bonds matured
GI Bill financed well-educated work force
Middle class swelled
Increase in GDP and Productivity

6. recession
A period where demand begins to decline, businesses lower production of goods & services, unemployment begins to rise, and GDP growth slows for several quarters
Reduced Economic Activity
GDP negative for 2 or more quarters
1.5% rise in Unemployment in 12 months
Late 2000s
Collapse of the housing market
Bank failures
High Unemployment
Low Consumer Confidence
Escalating Debt
Inflation
Rising gas and food prices

7. depression
A phase marked by high unemployment, weak sales of goods & services, and business failures
Sustained, long-term economic downturn
Large increases in Unemployment
Reduced credit availability
Large number of bankruptcies
Deflation
Bank failures

8. The great depression 1929 – late 1930s Stock Market Crash October 29th
“Black Tuesday”
Massive Bank Failures
Millions lost jobs
Global in scale
Economic Indicators
United States
Great Britain
France
Germany
Industrial Production
-46%
-23%
-24%
-41%
Wholesale Prices
-32%
-33%
-34%
-29%
Foreign Trade
-70%
-60%
-54%
-61%
Unemployment
+607%
+129%
+214%
+232%

9. What phase is the US in now?
recovery
A phase of the business cycle in which unemployment begins to decrease, demand for goods & services increases, and GDP begins to rise again
High levels of growth following a Recession
Government stimulus packages
What phase is the US in now?

10. Economic indicators Gross Domestic Product (GDP) Inflation
Consumer Price Index (CPI)
Productivity
Unemployment
Debt
Consumer Confidence

11. Gross domestic product
The total value of all final goods & services produced in a country in one year
GDP = private consumption + gross investment + government spending +(exports – imports)
Often reflects a country’s Standard of living

12. Strength of US economy to other countries
Top 10 largest world economies
Trading Economics
Gross Domestic Product in $ trillion
World Rank
Country
GDP 1
United States
17.418 2
China
10.380 3
Japan
4.616 4
Germany
3.859 5
United Kingdom
2.945 6
France
2.846 7
Brazil
2.353 8
Italy
2.147 9
India
2.049 10
Russia
1.857

13. An increase in the general price level
Inflation
An increase in the general price level
When prices increase, each unit of currency buys fewer goods & services
Caused by excessive growth of the money supply

14. Consumer price index
Shows change in the average prices of goods & services bought by consumers over a period of time
Related to inflation
Shows how much your money can buy

15. The quantity of a good an average worker produces in an hour
productivity
The quantity of a good an average worker produces in an hour
Measure of output from a production process
GDP per hour worked

16. unemployment
State of being without paid work, though willing and able to work and actively seeking work
Proportion of labor force that is without paid work
09/2015
5.1%

17. debt
money borrowed by the federal government of the US at any one time through the issue of securities by the Treasury and other federal government agencies
Deficit – the difference between the total amount spent by Congress and the amount received by the IRS
Was $17.7T last year, this year it’s $18.4 TRILLION
US National Debt Clock
Surplus – revenues exceed spending
Balanced Budget – revenues = spending
President Clinton, ?