Presentation on theme: "Unit 1.04 The Business Cycle Measuring Economic Activity."— Presentation transcript:
1 Unit 1.04The Business CycleMeasuring Economic Activity
2 The business cycleRecurrent periods during which the nation’s economy moves in and out of recession and recovery phasesMajor ups and downs of economyShort 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 marketTroughsGeneral decline in the stock market over a period of timeTransition from high investor optimism to widespread investor fear and pessimismprice decline of 20% or more over at least a two-month periodsometimes referred to as "The Heifer Market"
5 prosperityA 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 maturedGI Bill financed well-educated work forceMiddle class swelledIncrease in GDP and Productivity
6 recessionA period where demand begins to decline, businesses lower production of goods & services, unemployment begins to rise, and GDP growth slows for several quartersReduced Economic ActivityGDP negative for 2 or more quarters1.5% rise in Unemployment in 12 monthsLate 2000sCollapse of the housing marketBank failuresHigh UnemploymentLow Consumer ConfidenceEscalating DebtInflationRising gas and food prices
7 depressionA phase marked by high unemployment, weak sales of goods & services, and business failuresSustained, long-term economic downturnLarge increases in UnemploymentReduced credit availabilityLarge number of bankruptciesDeflationBank failures
8 The great depression 1929 – late 1930s Stock Market Crash October 29th “Black Tuesday”Massive Bank FailuresMillions lost jobsGlobal in scaleEconomic IndicatorsUnited StatesGreat BritainFranceGermanyIndustrial 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? recoveryA phase of the business cycle in which unemployment begins to decrease, demand for goods & services increases, and GDP begins to rise againHigh levels of growth following a RecessionGovernment stimulus packagesWhat phase is the US in now?
11 Gross domestic product The total value of all final goods & services produced in a country in one yearGDP = 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 economiesTrading EconomicsGross Domestic Product in $ trillionWorld RankCountryGDP1United States17.4182China10.3803Japan4.6164Germany3.8595United Kingdom2.9456France2.8467Brazil2.3538Italy2.1479India2.04910Russia1.857
13 An increase in the general price level InflationAn increase in the general price levelWhen prices increase, each unit of currency buys fewer goods & servicesCaused by excessive growth of the money supply
14 Consumer price indexShows change in the average prices of goods & services bought by consumers over a period of timeRelated to inflationShows how much your money can buy
15 The quantity of a good an average worker produces in an hour productivityThe quantity of a good an average worker produces in an hourMeasure of output from a production processGDP per hour worked
16 unemploymentState of being without paid work, though willing and able to work and actively seeking workProportion of labor force that is without paid work09/20155.1%
17 debtmoney borrowed by the federal government of the US at any one time through the issue of securities by the Treasury and other federal government agenciesDeficit – the difference between the total amount spent by Congress and the amount received by the IRSWas $17.7T last year, this year it’s $18.4 TRILLIONUS National Debt ClockSurplus – revenues exceed spendingBalanced Budget – revenues = spendingPresident Clinton, ?