Review Identify the 3 key parts of the definition of GDP How do we use GDP Identify what is NOT included in GDP List the 4 components of GDP Define Inflation Explain the difference between Nominal and Real GDP Name 5 of the 10 Most Popular Movies of All Time
THE BUSINESS CYCLE
Business Cycles The business cycle is a graph illustrating the relationship between real GDP and time. The changes are measured by increases or decreases in the real GDP.
Business Cycles Fluctuations are impossible to avoid and they can last from months to several years. The Business Cycle is divided into 4 stages:
Business Cycles Peak--------------- Recovery or Expansion----------- High point of Growth Period of Growth- When the recovery exceeds the previous peak, expansion begins
Business Cycles 3. Contraction or -----Recession 4. Trough---------------- Period of Slowdown- When contraction lasts for two quarters (6 months) it is known as a recession. Lowest level of production
Business Cycles The Factors that influence supply and demand are what cause fluctuations in the business cycle. Business Investment: a) Purchasing new Capital goods b) promote efficiency c) increase technology
Review What is the business cycle? Why is Real GDP used with the business cycle? Name the 4 stages of the business cycle. What is a contraction that lasts 6 months or more? Define Inflation Explain the difference between Nominal and Real GDP List 10 names that start with the letter L.
Business Cycles 2. Money and Credit: Individuals and businesses tend to borrow more money to make purchases when interest rates are low. 3. Public Expectations: The outlook on the market by consumers can lead to a recession or expansion
Business Cycles 4. External Factors: Changes in the world’s political and economic climate. (War, oil prices)
Business Cycle Graph Mini-project 1. Get a piece of blank paper and a variety of colored pencils or crayons. 2. Arrange your paper so it is in landscape position. 3. Draw EVERYTHING in regular PENCIL first in case you need to erase. You will go over everything with colored pencil or crayon afterward. 4. Using the full length and width of the paper, draw your X-axis and your Y-axis. Make sure you leave room for labels. 5. Label your Y-Axis – Real GDP 6. Label your X-Axis – Time 7. Draw the following information on your graph: Peak, Trough, Contraction/Recession, Recovery and Expansion. Make sure you make it as big as possible, you will need space to add information. 8. On the back of your paper, write the definitions for peak, trough, contraction, recession, expansion, and recovery. 9. Answer the following questions on the back of your paper: a. How are recovery and expansion different? b. How long must a contraction last before it is considered a recession?
Business Cycle Graph Mini-project
Business Cycle Graph Mini-project 8. On the back of your paper, write the definitions for peak, trough, contraction, recession, expansion, and recovery. 9. Answer the following questions on the back of your paper: a. How are recovery and expansion different? b. How long must a contraction last before it is considered a recession?