Transcript Ch. 14.1 Notes

Chapter 14.1 Notes
Business Cycles
I.
Business Cycle- the ups and downs of real
GDP ( 2 phases)
A. Recession- when economy/Real GDP
declines for at least six months
1. a recession begins when real GDP
starts going down
2. a recession ends when real GDP hits
a Trough/bottom and starts going up
B. Expansion- when economy/ GDP increases
after it hits a trough
1. an expansion ends when real GDP
reaches a Peak
C. Depression – when real GDP goes down
severely for an extended time
II. 3 causes of the Great Depression?
A. Big gap between rich and poor
B. people borrowed on easy credit and
couldn’t afford to pay back
C. other nations were poor & couldn’t afford to
buy U.S. stuff
III. What causes business cycle / Real GDP to go up
and down
A. Amount of investment by businesses changes
B. level of Innovation/Inventions changes
C. Interest rates change
D. External shocks (ex. War, oil prices)
IV. 2 methods to predict how the business
cycle will perform:
A. Spending by consumers, gov., business,
net exports
B. Index of leading indicators- 10 statistics
about economy(ex. avg. hrs. worked)