1. The Business Cycle
Ch.3 - Glencoe

2. The Business Cycle
Economies go through ups and downs as a result of wars, foreign competition and changes in technology
Business Cycle – rise and fall of economic activity over time

3. Business Cycle Model PROSPERITY PROSPERITY RECESSION RECESSION
(growth)
RECOVERY
RECESSION
(growth)
(slowdown)
(slowdown)
DEPRESSION
(lowest point)

4. Recession Recession – economic activity slows down
Spending and demand for product decreases
Business produce less = need fewer employees
Unemployment rate increases = people spend less
Can affect only one industry, related industries, or spread to the entire economy
Ripple Effect – when a recession in one industry leads to an effect in another

5. Prosperity Prosperity – is the peak of economic activity
Unemployment is low
Production of goods and services is high
New businesses open
Wages are usually higher
High number of imports

6. Eras that Changed the Economy
The Era of Mass Production 1914 – World War I (WWI) was the first mechanized war. It created a demand for massive resources. By the end of WWI, Henry Ford had perfected the assembly line.
How did the assembly line change American society?

7. Depression
Depression - A deep recession that affects the entire economy and lasts for several years
High unemployment
Low production of goods and services
Spreads to related countries
Depressions are rare
Examples: “Black Tuesday” Great Depression

8. Recovery
Recovery – a rise in business activity after a recession or depression
Production starts to increase
People go back to work and have money to spend
New demand for goods and services
News businesses open, but need to be innovative
Be on the edge of the competition to recover faster

9. Review Identify the four phases of the business cycle.
How does the ripple effect impact the economy?

10. Eras that Changed the Economy
The Cyber Era, 1995 – present. The internet has changed business and consumer behaviors. Business is done anywhere in the world, 24 hours a day.
How has the Internet changed the way people do business?