1. THE BUSINESS CYCLE

2. The national economy fluctuates resulting in periods of boom and bust.
THE BUSINESS CYCLE
The national economy fluctuates resulting in periods of boom and bust.
Inflation
Unemployment
Full employment
A Recession is 6 month period of decline in output, income, employment, and trade. (If really bad…then depression)

3. Stages of the Business Cycle
Expansion
increased output and employment
Increased Real GDP
A.K.A. Recovery
Peak
Point of highest real GDP
Contraction
Increased unemployment
Decreased output (decrease in real GDP)
Recession – lasts longer than 6 months (2 quarters)
Lengthy recession becomes a depression
Trough
Real GDP stops declining
Unemployment stops inclining

4. 200 Years of the Business Cycle
Why is the business cycle like a roller coaster?
How do wars affect the economy?

5. The Business Cycle Why does the economy fluctuate?
Retailer and Producers send misleading information about consumer demand.
Advances in tech, productivity, or resources.
Outside influences (wars, supply shocks, panic).
Who cares?
Macroeconomics measures these fluctuations and guides policies to keep the economy stable.
The government has the responsibility to:
Promote long-term growth.
Prevent unemployment (resulting from a bust).
Prevent inflation (resulting form a boom).

7. 2010 GDP Growth Rate= 2.8%

8. What is Economic Growth?
An increase in real GDP over time
An increase in real GDP per capita over time (usually used to determine standard of living)
Why is economic growth the goal of every society?
Provides better goods and services
Increases wages and standard of living
Allows more leisure time
Economy can better meet wants

9. Connection to PPC The shifters of the PPC affect GDP
The same information shown on the business cycle can be shown on a production possibilities curve.
Full employment
Unemployment
Inflation
The shifters of the PPC affect GDP
Change in quantity/quality of resources
Changes in technology
Changes in trade