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The Business Cycle

The Business Cycle. Business Cycle. Prosperity- highest period of economic growth Recession- economic slowdown Depression- prolonged recession Recovery- renewed economic growth. Business Cycle. Characteristics of Prosperity. Highest period of economic growth Low unemployment

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The Business Cycle

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  1. The Business Cycle

  2. Business Cycle

  3. Prosperity- highest period of economic growth Recession- economic slowdown Depression- prolonged recession Recovery- renewed economic growth Business Cycle

  4. Characteristics of Prosperity • Highest period of economic growth • Low unemployment • High production of goods and services • High consumer spending

  5. Charactersitics of a Recession • Economic slowdown • Rise in unemployment • Production slows down • Decrease in consumer spending

  6. Prolonged recession High unemployment Drastic decrease in production of products Extremely low consumer spending Poverty can result What is a Depression?

  7. What is Recovery? • Renewed economic growth • Increase in employment • Increase in production of goods and services • Increase in consumer spending • Moderate business expansion

  8. Economic Indicators • Gross Domestic Product • Inflation • Productivity • Unemployment

  9. Gross Domestic Product • Total dollar value of all final goods and services produced IN our country for one year. • Measure of how the economy is doing. • What consumers spend for food, clothing, and housing • What businesses spend for buildings, equipment and supplies • What government agencies spend to pay employees and buy supplies

  10. Inflation • Sustained increase in the general level of prices. • Mild inflation (2-3%) can stimulate the economy.

  11. Productivity • The number of items produced per worker

  12. Unemployment • When people who are willing and able to work, cannot find a job.

  13. The Great Depression Start Date: October 29, 1929

  14. Causes of Great Depression • Combination of greatly unequal distribution of wealth • Extensive stock speculation

  15. Reason for Gap • Productivity had greatly increased • No wage increase • Wages increased at a rate ¼ as fast as productivity • Government encouraged big business investments. • Supreme Court ruled minimum-wage legislation unconstitutional (1923).

  16. Economy • Must be a balance between supply and demand. • Since there was an imbalance of money, lower class could not buy goods. • Led to an oversupply (surplus) of goods. • Lower class could not afford goods.

  17. How did the Middle Class buy things? • Credit • Buy now, pay later. • Any new wages earned were used to pay for past purchases, no money left to buy new things

  18. Prosperity in Question • Wealth among industries not shared equally • Agriculture average yearly wage - $273 • Other industries average yearly wage - $750

  19. Speculation • When prices of stocks began to fall, spending of rich slowed • When spending of rich slowed, it eventually slowed in the middle class and poor • They wanted to make sure they didn’t overspend and lose jobs by not being able to pay interest

  20. CRASH!!!! • Domino Effect – One thing falls, everything else falls! • Since people stopped spending, jobs were lost since there wasn’t a demand for goods. • No demand for goods, no money coming in, can’t pay bills.

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