1. Business Cycle & U.S. Economy
Economics-2015
Business Cycle & U.S. Economy
Understanding the past & seeing the future!

2. Business Cycle GDP = C + I + G + (X-M)
Economic systems go through periods of fast growth and slow growth called the Business Cycle
The U.S. economy is currently growing only moderately (GDP = +2.1%)
The U.S. is still “recovering” from the Great Recession of 2009
Worst economic period since the Great Depression (1929)
GDP = C + I + G + (X-M)

3. Business Cycle Standard Pattern Peak Peak Trough
Expanding
Peak
Expanding
Trough
Contracting
| GDP | .
| Time |

4. Recessions The U.S. enters a recession every 7-10 years
2 consecutive quarters of negative GDP is considered a recession
Recessions typically last 16 months
The Government attempts “to help” the economy during recessions
Federal Government: by ↓ taxes & ↑ Gov’t Spending
Federal Reserve: by ↓ short term interest rates
Janet Yellen = current Chair of Fed

5. Business Cycle Worksheet
GDP & Unemployment

6. Problems with U.S. Economy in 2015
U.S. is currently operating below PPF Curve
(point B on PPF)
Why below PPF?
Unemployed workers (labor)
Underemployment of Human Capital
Declining Labor Force Participation
Recessions in Europe
Slow Growth in China A B

7. Alphabet Recoveries

8. Stock Market Cycles
The Stock Market also goes through a “business cycle”
Bull Markets = Over 20% rise from the trough
Bear Market = Over 20% fall from the peak

9. Stock Market Correction?