Economic Cycle Ups and Downs in the economy

Economic Cycle Ups and Downs in the economy that occur repeatedly.

Words to know • Recession: a relatively mild, widespread decline in business, trade and employment. • Depression: A deep, long-lasting decline in business, trade and employment. • Contraction: A period of general economic decline. Contractions are often part of a business cycle, coming after an expansionary phase and before a recession. • Expansion: Growth, as in an economic recovery. • Boom: A period of rapid economic expansion. • Recovery: A period in a business cycle following a recession, during which the GDP rises. • Gross Domestic Product: (GDP): The total market value of all final goods and services produced in a country in a given year

Economic Cycle contraction Growth/expansion recovery recession depression

The ups and downs of a capitalist economy may be illustrated by the business cycle. • During the “Great Depression” businesses closed, banks failed, GDP declined, prices went down, profits disappeared and unemployment increased! • From the boom of the 1920 s to the depression of the 1930 s to the recovery by 1942, this illustrates the “economic cycle” of the Great Depression Era.

Negative Patterns of Economic Cycle • • Increase in unemployment Decrease of price level Excess inventory Decrease of production Repossession Increase of business failure bankruptcy