…the economic roller coaster! The Business Cycle

 Economies naturally go through ups & downs.  The business cycle is the rise and fall of economic activity over time.  In the United States…  1930s, 50s, 70s, 2000s characterized by a drop in economic activity & rise in unemployment  Slumps followed by new waves of increased productivity and increased GDP

Stages of the Cycle

Prosperity  Also known as the “peak”  Higher wages, more jobs available, higher demand for goods/services  Unemployment is low, GDP is high  People are spending!

Recession  Economic activity slows down – less production of goods, downturns in industry  GDP decreasing, unemployment increasing  People are starting to save!

Depression  Also known as a “trough”  Deep recession that lasts for years and affects the entire economy  Unemployment is high, GDP is low  Government starts trying to “stimulate” the economy  People are saving!

Recovery  Also known as “expansion”  Rise in business activity after a recession or depression  Innovation occurs – businesses start bringing out new products & services  Unemployment decreasing, GDP increasing

Many of today’s Fortune 500 companies came from recessions or depressions… Entrepreneurs Who Rose from the Ashes

General Motors  The Panic of 1907  William C. Durant  High school drop-out working as a manager of Buick in Detroit  Acquired Oldsmobile, Cadillac, Pontiac  Launched Chevrolet (later joined GM in 1917)

Playboy Enterprises  Recession of 1953  Hugh Hefner  Former employee of Esquire who quit when his boss refused to give him a $5 raise  Designed his own magazine with the help of his friends

Sirius Satellite Radio  Early 1990s Recession  Robert Briskman  Former NASA engineer  COO at Geostart(satellite messaging company)  Figured out how to broadcast digital radio signals via satellite  Merged with XM Satellite Radio in 2008 to provide commercial- free radio 24 hrs/day

What are the four stages of the business cycle? How is each stage characterized by economic indicators (GDP, Unemployment)? REVIEW