Transcript Unit 2 _ ppt 2 _ The Business Cycle

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On your warm up/exit ticket sheet:
What do you think is the most traumatic
experience a person could go through in their
entire life?
Be ready to share.
 Frictional, Structural, or Cyclical?
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A recent college graduate who is seeking her first job
A former steelworker for a firm that has closed an obsolete plant
A worker who has quit his job to move to a new town to be with
his family
A carpenter who is laid off when housing construction declines
because of high interest rates
An autoworker who is laid off because auto sales are down
A homemaker who decides to seek work outside the home and
begins the job search
A telephone operator whose job is eliminated when the phone
company installs new computer-based switching equipment
An oil worker who is laid off because the demand for petroleum
declines
Today’s LEQ: How can we determine the overall health of the economy?
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The Business Cycle is a period of
macroeconomic expansion followed by a
period of contraction, or decline
Represents major fluctuations (not day-today ups and downs)
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Economists follow a country’s GDP to predict
business cycles
GDP is the total value of all final g/s produced
in an economy and helps to measure our
economic well-being
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Shows fluctuations: rising and falling of output in relation
to potential output
Expansion: Economic growth as marked by rise in GDP
Contraction: Economic decline as marked by falling GDP
Peak: Point at which output starts to decline (start of
recession)
Trough: Point at which output starts to increase (end of
recession)
The period between the trough and the next peak is called
the recovery period or expansion
Recession: two consecutive quarters (six months) of
negative growth in real GDP
Depression: deep recession with especially high
unemployment and low output
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We are always at some point in the business
cycle
 Cycles may last less than a year or continue for
many years
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Free enterprise systems are subject to
business cycles because economic decisions
are made by ind’ls and businesses acting in
their own best self interest
Government plays a role in attempting to
prevent wild swings in economic behavior
 Where we are in a given business
cycle affects our lives every day
 Available jobs?
 Prices rising?