Transcript Diapositiva 1 - Mr. Donecker`s Website

The Business Cycle
Mr. Donecker
10/4/12
Bell Activity
• Last year, the President said, “Right now,
a company can get a tax break for moving
a plant over-seas.”
• Which part(s) of GDP would this affect?
• How would the overall GDP be affected?
Cycle
• What is a cycle?
• Any complete round, or series of occurrences that
repeats or is repeated
• Where are there cycles in our lives?
• Carbon cycle, water cycle, nitrogen cycle, life cycle
The Business Cycle
• The movement of the economy from one
condition to another and back again
• (the ups and downs of GDP)
Prosperity
Depression
Prosperity
– Low Unemployment
– High Demand for goods and services
– High Productivity
– Called a “boom” period
Prosperity
Recession
– Decrease in Demand for goods
– Decrease in Productivity
– Rise in Unemployment
Ripple Effect
Depression
• A prolonged recession that spreads to
multiple sectors of our economy
– High Unemployment
– Low Demand for goods and services
– Low Productivity
Depression
Recovery
– Jobs begin to increase (lower unemployment)
– Demand for goods and services increase
– Productivity increases
Which Phase?
• High employment, increasing wages, more new or
expanding businesses
• Prosperity
• Consumer demand increases due to lower
unemployment
• Recovery
• GDP falls for a prolonged period of time due to
overwhelming Unemployment
• Depression
• Rising Unemployment, unsold goods, falling prices
• Recession
Ripple Effect
• The Great Depression was caused by a
fall in spending.
• What does this statement mean?
Ripple Effect
• In the 1920’s
• Consumers for the first time could buy houses and
cars on an installment plan
• These purchases created jobs
–
–
–
–
Building houses and cars
Furniture and appliances to fill houses
Production of steel and other materials for houses/cars
New plants, facilities and equipment
• Governments built paved roads for the new
automobiles and electric plants and water and
sewage facilities to service the new households
Ripple Effect
• The prosperity of workers in all these
industries allowed them to spend a lot of
money, thus providing income to other
workers — income which they in turn
spent to buy other goods and services.
Ripple Effect
• At the end of the 1920’s
• Business firms slowed their expansion of new
plants and machinery
• If you work in a factory producing
machinery…
• STAND UP – you are now unemployed because
companies are spending less on machinery
Ripple Effect
• At the end of the 1920’s
• Sales new automobiles began to fall
• If you work selling cars…
• STAND UP – you are now unemployed because
sales of new cars are down
Ripple Effect
• Because car sales fall
• Car dealers cancel orders from car manufacturers
• Manufacturers lay off employees due to decrease
in production
• If you are an autoworker…
• STAND UP – you are now unemployed because
demand for new car production is down
Ripple Effect
• Because manufactures slow down
production of new cars
• Auto factories cancel their orders for steel and
other raw materials used to make cars
• If you work as a steel worker
• STAND UP – you are now unemployed because
the demand for steel is down
Ripple Effect
• At the end of the 1920’s
• Sales of homes began to fall
• If you work in Construction
• STAND UP – you are now unemployed because
new house development declines
Ripple Effect
• Because home sales are down
• Furniture sales are down
• If you work in furniture sales
• STAND UP – you are now unemployed
• Because furniture sales are down
• Orders for furniture manufacturing are down
• If you work in a furniture factory
• STAND UP – you are now unemployed
Ripple Effect
• Look at all the unemployed people
• Those of you still employed…
• Are you nervous for your jobs?
• Unemployed people don’t buy new things
• If you work selling clothes
• STAND UP – you are now unemployed
Ripple Effect
• People who are unemployed don’t eat at
restaurants
• If you work in a restaurant
• STAND UP – you are now unemployed
Ripple Effect
• Unemployed people don’t buy expensive
food items
– This means lower profits for grocery stores
• If you work at a grocery store
• STAND UP – you are now unemployed due to a
decrease in profits
Ripple Effect
• But bad economic times don’t last forever
• Goods wear out making it necessary for
consumers to buy new goods ex. Cars
• If you work in car sales
• SIT DOWN – you are reemployed
Ripple Effect
• Because more cars are being sold
• Orders to the manufacturer increase
• Orders to the steel manufactures increase
• If you work in car or steel manufacturing
• SIT DOWN – you are now reemployed
Ripple Effect
• When more people are employed
• More new homes are built
• If you work in construction
• SIT DOWN – you are now reemployed
• If you work in furniture sales and
production
• SIT DOWN – you are now reemployed
Ripple Effect
• When more people are employed
• More people eat out, buy new clothes, and higher
priced groceries
• If you work at a restaurant, grocery store,
or selling clothing
• SIT DOWN – you are now reemployed
Ripple Effect
• As purchases of various new products rise
• business firms expand production and buy new
machinery and equipment
• If you work selling machinery
• SIT DOWN – you are now reemployed