Presentation on theme: "Phases and Influences on the Business Cycle CHAPTER 10, Section 2"— Presentation transcript:
1 Phases and Influences on the Business Cycle CHAPTER 10, Section 2 BUSINESS CYCLESPhases and Influences on the Business CycleCHAPTER 10, Section 2
2 BUSINESS CYCLESBusiness cycles are fluctuations, or changes, in a market system’s economic activity.These fluctuations are measured by increases or decreases in real GDP.
3 PHASES OF THE BUSINESS CYCLE Expansion and RecoveryPeakContraction or RecessionTrough
4 EXPANSIONA period of economic expansion and growth
5 PEAKA high point at which the economy is at it’s strongest and most prosperous.At a peak, high consumer demand encourages producers to use plant capacity and more fully to hire workers.
6 CONTRACTIONWhen real GDP stops increasing, the business cycle enters a period of business slowdown known as a contraction or a recession.A recession is a decline in real GDP for two or more consecutive quarters (6 months or more)
7 DEPRESSIONProlonged and severe recessions such as the Great Depression of the 1930’sThe Great Depression was the most severe contraction in US economic history.
8 TROUGH The final stage in the business cycle Occurs when demand, production, and employment reach their lowest levels.Following the trough, the economy enters a period of recovery and the expansion phase begins once again.