3 Read to LearnDescribe the four stages of the business cycle.Explain how individuals and government influence the economy.
4 The Main IdeaIn a market economy, there is an economic cycle, which includes four stages: prosperity, recession, depression, and recovery. These are also the four stages of the business cycle. In the last few decades, we have experienced the economic cycle a number of times.
5 Key ConceptsGuiding the EconomyFour Stages of the Business Cycle
6 Key Termsthe rise and fall of economic activity over timebusiness cyclethe peak of economic activityprosperity
7 Key Termswhen economic activity slows downrecessiona deep recession that affects the entire economy and lasts for several yearsdepression
8 Discussion StarterHow does prosperity in another country might affect the economy in the United States?
9 Key Terma rise in business activity after a recession or depressionrecovery
10 Guiding the EconomyCongress and the President enact laws that impact fiscal policy.Government expenditures are often planned to guide the economy.
11 Guiding the EconomyThe Federal Reserve (“the Fed”) is a government agency that guides the economy.
12 Graphic Organizer Guiding the Economy The Federal Reserve Regulates the amount of money in circulationControls the amount of money loanedControls interest ratesState and local governments also take steps to influence their economies
13 Four Stages of the Business Cycle The business cycle of one country can affect other trading partners.business cyclethe rise and fall of economic activity
15 ProsperityProsperity results from low unemployment, high production of goods and services, and the opening of new businesses.prosperitya peak of economic activity
16 Characteristics of Prosperity Graphic OrganizerCharacteristics of ProsperityHigher wagesGreater demand for goods to be producedMore people buy houses, which creates work for buildersPeople buy more goods from other countries, which benefits those countries
17 RecessionDuring a recession, businesses produce less, so they need fewer workers.recessionwhen economic activity slows down
18 Characteristics of a Recession Graphic OrganizerCharacteristics of a RecessionBusinesses produce lessUnemployment increasesPeople have less money to spendFewer goods and services are producedThe GDP declines
19 RecessionA recession in one industry can cause a ripple effect throughout the entire economy.
20 DepressionA depression can be limited to one country but usually spreads to related countries.depressiona deep recession
21 Characteristics of a Depression Graphic OrganizerCharacteristics of a DepressionHigh unemploymentLow production of goods and servicesCan last for several yearsSpreads to other countriesHigh number of unused manufacturing facilitiesVery rare
22 DepressionThe stock market crash on October 29, 1929, or “Black Tuesday,” marked the beginning of the Great Depression.
23 Graphic Organizer Many banks around the country failed Unemployment rose nearly 800 percentThe Great DepressionMany townsand other civic bodies printed their own moneyThe GDP fell nearly 50 percentThe average manufacturing wage was 5 cents an hourThe money supply fell by one-third
24 “Depressionproof”During the Great Depression, millions of people lost their homes and livelihoods.A large percentage of middle-class Americans were able to keep their jobs. These people were in professions considered “depressionproof.”
25 Production starts to increase during a recovery. a rise in business activity after a recession or depression
26 Characteristics of a Recovery People start going back to workPeople have money to purchase goods and servicesDemand for goods and services stimulates more productionNew businesses openBusinesses become more innovative
27 RecoveryIn 1939, the United States was beginning to recover from the depression when World War II began.The war increased the rate of recovery because of the demand for production.
28 What is the stage that follows a recession or depression? The recovery stage can happen after either a recession or a depression.
29 What is the difference between a recession and a depression? A recession is a slight downturn; a depression is a major downturn.
30 Why may innovation play an important role in the recovery stage of a business cycle? Innovation creates demand that leads to more employment and production, which leads to more demand.
31 After you ReadQuestions After you read pg. 47Online Study Glencoe.com
32 Homework Critical Thinking During the Depression, the U.S. government established the Tennessee Valley Authority. Visit the TVA website and write a short report on how it spurred the recovery.