The Business Cycle An Economic Concept

Objectives Define the business cycle Explain the four stages of the business cycle Examine causes of the business cycle

The Business Cycle There are FOUR stages: The cycle of economic growth & decline of an economy There are FOUR stages: Prosperity Recession Depression Recovery

Also Known as Prosperity Peak The high point of the economic prosperity The top of the business cycle Customers are hopeful about the future They increase their level of spending Also Known as Prosperity

Also Known as Recession Contraction Demand starts to fall The peak has passed Considered “bad times” for businesses Fewer sales and less profit is being made People start to lose their jobs Also Known as Recession

Also Known as Depression Trough Recession lasting years Effects entire economy Economic activities stop their decline The low point of economic activity: low profits Businesses begin to fail People continue to lose jobs Also Known as Depression

Expansion Rise in business activity after a recession or depression The growth part of the cycle Rise in business activity after a recession or depression Consumers have a hopeful outlook about business and the economy Demand is increasing Also Known as Recovery

The Business Cycle

Some Causes of the Business Cycle Government Regulations Consumer Behaviors

Checkpoint Activity Can the SER industries profit during: A recession? Explain. A depression? Explain. How can consumer behaviors affect the business cycle? What effects might this have on the SER industries? What SER industries might continue to do reasonably well during a recession?