Transcript The Business Cycle

The Business Cycle
MK, U 23
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PRONUNCIATION
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PRONUNCIATION
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The Business Cycle
the recurring and fluctuating levels of
economic activity that an economy
experiences over a long period of time
(www.investopedia.com)
Recur – come again, happen again
Fluctuate – change ,vary, oscillate
Output - production
The Business Cycle
→ MK, p 114
Lead-in discussion
Vocabulary 1
Divide into two groups
downturn
peak
downswing
contraction
trough
expansion
recession
depression
slump
upturn
recovery
boom
economic ______ vs. economic
______
•
•
•
•
•
contraction
depression / slump
trough
recession
downturn /downswing
•
•
•
•
•
upturn
boom
expansion
peak
recovery
Match the opposites, pls!
economic decline vs. economic
growth
•
•
•
•
•
depression / slump
recession
downturn /downswing
contraction
trough
•
•
•
•
•
boom
recovery
upturn
expansion
peak
Viewing/listening
http://www.youtube.com/watch?v=EMHkiKxtlvw
Make notes to capture the most important
information:
•“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
•NBER = National Bureau of Economic Research
•3 indicators of recession by NBER:
– GDP = gross domestic product
– employment
– wholesale – retail trade
•definition of recession:
– 2 or more consequtive quarters of negative economic
growth
•4 phases:
–
–
–
–
Peak
Recession
Trough
Expansion (recovery)
• economic trends in recession:
–
–
–
–
Consumer spending slows
Inventories build up
Companies reduce output and layoff employees
Unemployment rises
• economic trends during a recovery
–
–
–
–
–
Activity accelerates
Consumer spending improves
New orders are placed
Companies increase output and add employees
Unemployment declines
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
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 or expansion?
• E: economic activity picks up •
again
•
• R: businesses make fewer
sales
• E: excess inventories are used •
up
•
• R: companies earn less
revenue
•
• E: new orders are placed
•
• E: production is ramped up
again
• E: job opportunities improve *
R: businesses cut back
on output
R: unemployment rate
goes up
R: eventually* it reaches
a trough.
E: eventually it tops out
R: consumers spend less
money
E: sales improve
at an unspecified later
time, in the end
V-SHAPED OR U-SHAPED
RECESSION?
• begins abruptly
• reaches a trough
quickly
• recovers quickly
• slowdown lingers*
• takes a long time for
activity to pick up
again
* to remain existent
although often waning in
strength, importance, or
influence
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.
2.
3.
4.
5.
6.
7.
8.
9.
What happens to GDP in a business cycle?
What happens during an upturn? (What tends to rise?)
What is a boom?
What happens during a downturn? (What falls?)
What is the difference between a recession and a
depression? (Synonyms?)
What is the most probable cause of the business
cycle?
How do people behave in good times? And in bad
times?
How is investment connected with demand?
What is creative destruction?
Team work: Comprehension
Causes of the business cycle: internal & external
How is internal theory different from external theory?
• Internal (endogenous) theories:
beliefs about the future
interest rates
wages and salaries
↓
consumption (demand = output)
↓
investments (grow)
• External (exogenous) theories:
technological, political and demographic changes
Why are economies plagued by
recurrent business cycles?
You might want to read what Kitson
says about Keynsianism:
(Listening 1 & 2, p 117, script p 174)
HOMEWORK
Reading 2, MK pp 117, 118:
Keynesianism and Monetarism
- do vocabulary 2: Fiscal and monetary
policy, p 116
- read and allocate headings (A – E)
- match up the half-sentences (p 118)
Discussion: answer the questions to
prepare for discussing Keynesianism &
Monetarism