Transcript business cycle

Peak
Expansion
Contraction
Trough
The business cycle is a period of
macroeconomic expansion followed by a
period of contraction. During the
expansion phase, a period of economic
growth as measured by a rise
in real GDP occurs. Once a peak is
reached, this is the height of the economic
expansion, when the real GDP stops
rising. Then a contraction occurs where
there is a decline marked by falling real
GDP. Which ends in an economic
trough, which is the lowest point in an
economic contraction, when the real GDP
stops falling.
Gross Domestic Product
National
Income and
Product
Accounts
-National income
accounting system
collects macroeconomic statistics
On production
income, investment
savings
-Data compiles by
government in
National Income
And Product
Accounts [NIPA]
Gross
Domestic
Product [GDP]
-GDP is dollar value
of all final goods and
services produced
within a country’s
borders in a given year
-Expenditure approach
calculates GDP by
totaling estimates on
annual expenditures on
exports and imports
-Income approach
calculates GDP by
adding up all the
Income earned in
the economy
Nominal
Versus
Real GDP
Limitations
To GDP
Other Income
And Output
Measures
Influences
On GDP
-Nominal GDP is the
GDP Measured
in current
price
-Real GDP is
measured in
constant, or
unchanging,
prices
-Limitations
include nonmarket activities,
underground
economy, negativeexternalities,
and quality of life
-Limitations
suggest that
GDP is somewhat
flawed measure
of output and income
-Gross national
Product [GDP]:
Annual income earned
by US owned firms
and US residents
-Net National
Product [NNP]: the
GNP Minus the
cost of depreciation
-National income [NI]:
the NNP minus
sales and excise
taxes
-Aggregate supply is
total amount of
goods and services
in the economy
available at all
possible price
levels
-Aggregate demand
is amount of goods
and services in the
economy that will
be purchased at al
possible
price levels
Business Cycles
An economic
expansion is a
period of economic
growth measured by
a rise in real GDP. In
the expansion
phase, the economy
enjoys plentiful jobs,
a falling employment
rate, and business
prosperity
The peak is the
height of an
economic
expansion. This
is the point
when the real
GDP stops
rising.
If real GDP falls for
two consecutive
quarters, the
economy is said to
be in a recession.
A recession is a
prolonged
economic
contraction.
Contraction is
a period of
economic
decline
marked by
the falling
real GDP.
Unemployme
nt rises in this
period.
When a recession is
especially long and
severe, it can be
called a depression.
During a depression
there is high
unemployment and
low factory output.
In the trough
period the
economy bottoms
out. This is the
lowest point in an
economic
contraction, when
the real GDP stops
falling.
Stagflation occurs
when there is a
decline in real GDP
combined with a rise
in the price level.
Cause: Worker
output increases
Cause: GDP
keeps
pace with
growing
population.
Cause: Higher
saving and
investment
Economic
Growth
Cause:
Technological
progress
Effect: Real GDP
per capita rises
Effect: Capital
deepening
Effect: Higher
standard of
living
The Business Cycle!!!!
______
_________
_______
_________
The __________ is a period of
macroeconomic ________ followed by a
period of ____________. During the
expansion phase, a period of economic
____________ as measured by a rise
in real ________ occurs. Once a peak is
reached, this is the height of the economic
expansion, when the real GDP
__________. Then a ___________ occurs
where there is a __________ marked by
falling real GDP. Which ends in an
economic____________, which is the
__________ in an economic contraction,
when the real GDP
___________________.
Gross _____________ Product
-National income
accounting system
collects macroeconomic statistics
On production
income, investment
savings
-Data compiles by
government in
National Income
And Product
Accounts [NIPA]
-GDP is dollar value
of all final goods and
services produced
within a country’s
borders in a given year
-Expenditure approach
calculates GDP by
totaling estimates on
annual expenditures on
exports and imports
-Income approach
calculates GDP by
adding up all the
Income earned in
the economy
-Nominal GDP is the
GDP Measured
in current
price
-Real GDP is
measured in
constant, or
unchanging,
prices
-Limitations
include nonmarket activities,
underground
economy, negativeexternalities,
and quality of life
-Limitations
suggest that
GDP is somewhat
flawed measure
of output and income
-Gross national
Product [GDP]:
Annual income earned
by US owned firms
and US residents
-Net National
Product [NNP]: the
GNP Minus the
cost of depreciation
-National income [NI]:
the NNP minus
sales and excise
taxes
-Aggregate supply is
total amount of
goods and services
in the economy
available at all
possible price
levels
-Aggregate demand
is amount of goods
and services in the
economy that will
be purchased at al
possible
price levels
Business Cycles
An economic
__________ is a
period of economic
______ measured
by a rise in real
________. In the
expansion phase,
the economy enjoys
__________, a
_____________
employment rate,
and _____________
The ______ is
the ______ of
an economic
_______. This
is the point
when the ____
_____________
____________.
If real GDP falls for
______ ________
quarters, the
economy is said to
be in a ________.
A recession is a
_________
economic
contraction.
________ is
a period of
economic
__________
marked by
the ________
real GDP.
___________
In the ________
period the ______
bottoms out. This
is the
___________ in an
economic
contraction, when
the real GDP ____
__________.
_______________
When a __________
is especially long and
severe, it can be
called a ________.
During a depression
there is _____
_______________
and _____________
output.
Stagflation occurs
when there is a
decline in real GDP
combined with a rise
in the price level.
Cause:
Cause:
Cause:
Economic
Growth
Effect:
Effect:
Cause:
Effect: