Transcript THE BUSINESS CYCLE

THE BUSINESS
CYCLE
UNIT 23
Recession in the news…
US slips back into recession
EU sees recession, record dole
queues this year
UN report predicts likely global
economic downturn in 2013
LEAD-IN p. 114
/trɒf/
The Business Cycle
the recurring and fluctuating levels of
economic activity that an economy
experiences over a long period of time
(www.investopedia.com)
 Growth- expansion, upturn
 Peak- GDP tops out
 Trough /trɔf/- economic activity
bottoms out
 Recession- contraction
/kən’trækʃən/, downturn
Viewing http://www.youtube.com/watch?v=EMHkiKxtlvw
 “a backwards rollercoaster”
3 indicators of recession by NBER
definition of recession
4 phases
economic trends in recession
V-shaped recession v. U-shaped recession
Collocations: recession or expansion?

 economic activity picks up
again
 businesses make fewer sales 
 excess inventories are used

up
 companies earn less revenue

 new orders are placed
 production is ramped up again 
 job opportunities improve

businesses cut back on
output
unemployment rate goes
up
eventually* it reaches a
trough.
eventually it tops out
consumers spend less
money
sales improve
* at an unspecified later
time, in the end
Collocations: recession v. expansion
economic activity slows down 
consumers spend less money
businesses make fewer sales 

inventories build up
companies earn less revenue

fewer orders are placed

businesses cut back on output
unemployment rate goes up 
businesses reduce the number
of people on payrolls
 eventually it reaches a trough 









economic activity picks
up again
sales improve
excess inventories are
used up
new orders are placed
production is ramped up
again
job opportunities improve
unemployment rate
comes down
eventually it tops out
V-SHAPED OR U-SHAPED
RECESSION?
 begins abruptly
 reaches a trough
quickly
 recovers quickly
v
 slowdown lingers*
 takes a long time for
activity to pick up
again
* to remain existent
although often waning in
strength, importance, or
influence
U
READING (MK, p. 114,115)
1. What happens to GDP in a business cycle?
2. What happens during an upturn? (What tends to
rise?)
3. What is a boom?
4. What happens during a downturn? (What falls?)
5. What is the difference between a recession and a
depression? (Synonyms?)
6. What is the most probable cause of the business
cycle?
7. How do people behave in good times? And in bad
times?
8. How is investment connected with demand?
9. How is internal theory different from external theory?
10. What is creative destruction?
Comprehension
IDEAS FOR MINI TALKS
Joseph Schumpeter :economic ideas
The Great Depression
http://www.youtube.com/watch?v=VpKmfjf5tUk