1 Objectives To examine the four phases of

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Objectives • To examine the four phases of the business cycle. • To relate the business cycle to current trends in the market by analyzing specific companies. • To demonstrate clear knowledge of the growth phase and comparing companies which are in this category those on the rise and those declining. 2

The Juglar Cycle • Was invented by the French physician and statistician Clemente Juglar • Was the first identified cyclical patterns within the economy • Recognizes the business cycle occurring every eight to 11 years • Is often referred to as “The Business Cycle” 3

The Business Cycle • Explains the fluctuations in economic activities • Represents expansion and retraction in the economy over a period of time. • Divides into four parts: – growth – peak – recession – trough 4

Real GDP The Business Cycle Time 5

Growth • AKA: expansion or recovery • Occurs when persistent increases in the key measurements of aggregate economic activities are present • When the economy is doing well. Aggregate: sum or whole amount of something 6

Growth • Accounts for the increase in productivity among companies toward full production • Causes a rise in price before full employment and production is attained Productivity: measurement of physical output for each unit of input used, usually referring to labor hours 7

Aggregate Economic Activities • Aggregate – sum or whole amount • Includes: – employment – income – sales – productivity 8

Causes of Growth – New Businesses – more branches of the business – introduction of new or improved product – Example? 9

The Peak • business activity are at maximum – full employment – level of output at or near capacity • Often causes higher prices. • Why? ? • transition point from growth to recession 10

Causes for the Peak – boom in the economy – sudden need or want of the product – availability of product rises – product is unique for the time being 11

Recession • AKA contraction • Follows the peak • Definition: two consecutive quarterly declines in Gross Domestic Product • a decline in: – total output - Productivity – income – employment – trade 12

Gross Domestic Product • The total market value of all goods and services produced within the borders of a country during a specific time period • Another Definition: • GDP - total dollar value of all goods and services produced over a specific time period 13

Recession • Occurs in all companies • Rarely causes price level to fall – unless severe and prolonged, as in a depression • Differs from depression – depression occurs when GDP drops by more than 10 percent while a recession experiences a less severe drop 14

Causes of Recession – product falls behind in usefulness, technology or want – value of the dollar declines – customer debt People are not spending money! 15

The Trough • lowest levels during a recession • least amount of output and employment • May be short or long lived • Ends the period of recession and begins growth 16

Causes of the Trough – product is severely outdated – need or want for the product is at an all time low – product has not changed over time – many customers already possess the product 17

Business Cycle Indicators • Include the following factors: – labor force (employment) – wages, labor costs and productivity – exports and imports – national defense – personal incomes and consumer attitudes – production 18

Stages of the Business Cycle Activity Directions: 1. Research one company (Microsoft®, Apple®, Goodyear® or Chevrolet®, AT&T, Wal-Mart, Kimberly-Clark, JC Penney, Exon Mobile) and determine which stage of the business cycle each is in currently. 2. Research the company and the different stages of the Business Cycle. 3. Create a breakdown of the stages of the Business Cycle for the company that you chose. 4. 5 slide Power. Point a. Slide 1 = Your Name and Company Name b. Slides 2 -5 = the 4 stages of the Business Cycle of the company 19