Business Cycle The periodic and cyclical ups and
Business Cycle The periodic and cyclical ups and downs of the economy
Expansion Period -phase where the economy is growing Expansion Period • Gross Domestic Product increases from year to year -amount of goods produced? • Output of goods and services increases – people expect to make more -number of jobs produced? What happens in the expansion period? • More goods and services means more jobs for people _______________ -number of business starts _______________ • More businesses starting – expect to produce more _______________ Why must the government be careful during the expansion period?
Peak Period -phase where the economy has reached its peak of growth • Everything is at its best possible level -amount of goods produced? What happens in the peak period? _______________ -number of jobs produced? _____________________________ Why must the government be careful during the peak period? -number of business starts
Contraction Period -phase where the economy is starting to decline from its peak activity Contraction Period • Gross Domestic Product getting less from year to year • Could lead to a recession -amount of goods produced? • Demand goes down, which causes supply to decrease -number of jobs produced? • Firms not selling as much, number of jobs decrease -number of business starts • Less new businesses – do not expect to make money What happens in the contraction period? _____________________________ Why must the government be careful during the contraction period?
Trough Period -phase where the economy has reached its lowest point • All are at the lowest possible levels, could lead to depression -amount of goods produced? What happens in the trough period? _______________ -number of jobs produced? _____________________________ Why must the government be careful during the trough period? -number of business starts
Standard of Living -a measure of how well a person lives as well as the amount of free time they have • Make sure all Americans have enough goods and services • Compare ourselves to other nations -Gross Domestic Product -the value of all goods and services produced in a nation in a given year • Measures quantity, not quality -Why do we compare GDP with previous years? • To see whether or not the economy is growing and to decide what the government should do to help
Inflation Concerns -Inflation -a general increase in the cost of goods and services • Rise in prices -Why is inflation a bad thing for the economy? • Reduces purchasing power of money and alters people’s decisions -Consumer Price Index • 400 commonly-used items sampled by the government to determine prices -Controlling Inflation • Federal reserve
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