Transcript Business Cycle

Business Cycle
Measuring Economic Activities
• Gross Domestic Product (GDP): The total market
value($ value) of all the goods and services
produced within the borders of a nation during a
specified period.
• Usually reported on an annual basis
• Per Capita GDP: A nations GDP divided by its
population
• Consumer Price Index (CPI): Calculated each
month by the Bureau of Labor Statistics
• Price index determined by measuring the prices of a
“market basket”
• Ex. Food, housing, medical care, entertainment
• A business cycle is not a regular,
predictable, or repeating phenomenon
like the swing of the pendulum of a
clock.
• Its timing is random and
unpredictable. A business cycle is
identified as a sequence of four
phases.
Phases of the Business Cycle
• Expansion (A speedup in the pace of
economic activity) Rise in real GDP
• Recovery: right after a trough, economy is getting better
• Prosperity: right before a peak, economy is at its best
• economic growth
• Contraction (A slowdown in the pace of
economic activity)
• Economic decline marked by falling GDP
• Recession: 6 straight months of contraction
• Depression: Especially long contraction
Phases of the Business Cycle
• Trough (The lower turning point of a business
cycle, where a contraction turns into an
expansion)
• GDP stops falling
• Peak (The upper turning of a business cycle)
• When GDP stops rising
**A trough and peak both represent a turning point in
the business cycle**
Business Cycle Continued…
• Where we are in a given business cycle
affects our lives every day. If the
economy doesn’t create enough jobs, high
school & college graduates have trouble
finding work.
• If prices rise, but incomes do not, our
ability to buy what we need declines.
National Debt
http://brillig.com/debt_clock/
• http://www.usdebtclock.org/
National Debt
• The National Debt is the total amount of money
the Federal Government owes to bondholders.
• The debt is owed to investors who hold treasury
bonds. If you invest in a treasury bond, the
money that one uses to buy the bond is used to
finance the National Government.
• A bond is essential an IOU issued by the
government as a way for them to borrow money.
Problems of the National Debt
• Reduces the funds available for businesses to
invest.
• The government must pay interest to
bondholders, the more the government
borrows, the more interest it has to pay.
• Roughly, to pay off the National Debt today, each
citizen would have to pay just over $40,083.53
• When President Bush took office over 10
years ago, the national debt was at $5.6
trillion; since then, big budget surpluses
have collapsed into huge deficits, and the
debt has shot up more than 50 percent.
Business Cycle Activity
• Please create the business cycle for the following items on a
separate sheet of paper…
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Ski Boots
Sun screen
Wool socks
Sandals
Summer Shorts