Chapter 3 Economic Activity in a Changing World

Chapter 3 Economic Activity in a Changing World 3. 2 The Business Cycle

Guiding the Economy U. S. economy is shaped by a mix of public and private forces. n The government spending of tax dollars effects the economy. n The government takes certain steps to influence the economy. n

Four Stages of the Business Cycle n Business Cycle: the rise and fall of economic activity over time. ¨ Prosperity ¨ Recession ¨ Depression ¨ Recovery

Prosperity n Prosperity: a peak in economic activity ¨ Wages are higher ¨ More income per worker ¨ Unemployment rate is low. ¨ Demand is high on most goods.

Recession n Recession: when economic activity slows down. ¨ Businesses produce less. ¨ Workers are paid less or laid off. ¨ Unemployment rate starts to increase. ¨ Drop in GDP.

Depression n Depression: a deep recession that affects the entire economy and lasts for several years. ¨ Unemployment ¨ GDP rate is high. is low ¨ Few goods and services are available. ¨ Stock market may “crash”.

Recovery n Recovery: a rise in business activity after a recession or depression. ¨ Unemployment rate begins to lower. ¨ GDP starts to rise. ¨ Demand for products and services is on the rise. ¨ Innovation starts to occur.

Homework n n Complete Chapter 3 -2 Reading Activity and 3 -2 Graphic Organizer (Save to S: Drive) Review questions on page 47, 1 -3