Transcript PowerPoint - Economics on Demand

Reading the Business
Cycle
S
Fill in the blanks
What goes up, must come _______.
Too much of a good thing, is a _____ thing.
Life has its ups , and ________.
All good things come to an ___________.
The lowest point of real
Real output in the
GDP reached during the
economy is decreasing,
business cycle is known as
and the unemployment
the trough. If the trough is
rate is rising. As the
particularly deep, itPeak
may be
contraction continues,
called a depression. A
inflationary pressures
depression is an economic Contractionary
subside. If the recession
situation where the level of
Expansionary
continues long enough,
output falls to especially
prices may actually start
low levels
Expansionary
Real
GDPand
is at its
to fall, a situation known
unemployment climbs to
highest
point
of in
thethe economyas deflation.
very high Real
levels output
relative to
Trough
business
cycle. and the
the historical
isaverage.
increasing
unemployment rate is
declining. As the economic
expansion continues,
inflation may begin to
accelerate.
- Inflation
- Interest rates are high
- Low unemployment
4%
Peak
Contractionary
Expansionary
Expansionary
A recession occurs
when real GDP falls
for two consecutive
quarters.
Trough
- Deflation
- Interest rates are low
- High unemployment +6%
Expansionary
Price Level
AS
A minimum wage
increase or tax cut
can shift aggregate
demand to the right
causing demand for
all goods to increase,
and may lead to
inflation.
P1
P
AD
Q Q1
Real GDP
AD1
Contractionary
Price Level
AS
P
P1
AD1
Q1 Q
Real GDP
A tax increase or
less government
spending can shift
the demand curve to
the left causing
demand for all goods
to decrease and may
lead to a recession.
AD
Contraction/Expansion of the Business
Cycle
Expansion
Contraction
S Business investments increase
S Drop in business spending
S Interest rates go from low to
S High unemployment (6 - 10%
high
in recession)
S Consumer confidence increases S Interest rates go from high to
low
S Low unemployment
S Inflation may rise
S Consumer confidence
S Saving for a rainy day
S Deflation may occur
You are in an economy that depends on
sales of consumer goods. Consumer
spending is leading to economic
expansion. Consumers are buying houses,
cars, and electronic goods. These
purchases are creating new jobs for
workers in these industries.
The following occupations
should stand
S Autoworkers
S Home builders
S Airplane workers
S Computer software designers
The following occupations should stand
S
Clothing sales workers
S Restaurant workers
S Hair Stylists
S Electronic entertainment sales workers
As people’s incomes increase they become interested in more
purchases of things such as clothing, meals in restaurants, and
entertainment.
Consumer spending is beginning to
decline!!
Consumers choose to spend less on clothing, meals in
restaurants, and entertainment……
S Clothing sales workers
S Restaurant workers
S Hair Stylists
S Electronic entertainment sales workers
Consumer spending continues to
decline!!
Consumers and businesses choose to spend less on cars,
houses, airplanes, and computer equipment……
S Autoworkers
S Home builders
S Airplane workers
S Computer software designers