UNDERSTANDING ECONOMICS PART II 53 Describe the phases

UNDERSTANDING ECONOMICS PART II #53 - Describe the phases of the business cycle #54 - Explain the concept of gross domestic product #55 - Explain productivity and its effects on individual businesses and the economy as a whole

Phases of the Business Cycle Recurring changes in economic activity � History shows that sometimes an economy grows (expansion) and sometimes is slows down )contraction) � Economies have followed the patterns � Sometimes called “Economic Cycle” � Four patterns: Expansion, Recession, Trough-Depression, Recovery

Business Cycle Recovery Expansion Recession Trough

Expansion � � � � Economy is flourishing Sometimes referred to as “prosperity” Nationwide low unemployment Increase in output of goods and services High consumer spending Good time for new businesses to start up/expand Expansions continues until it reaches a “Peak” ends expansion and begins “recession”

Recession � � � � Period of economic slow down Lasts for at least two quarters (or 6 months) Businesses reduce work force Consumers have less money to spend Producers make fewer goods and services Research and development is cut back/ business expansion put on hold Can end quickly or last a long time End is signified by “trough”- lowest point in the recession

Trough � � � Lowest point in business cycle Marks transition from recession to recovery period Economy stops slowing and shows signs that recovery is near

Depression � � � � Prolonged recession Nearly impossible to find a job Businesses shut down Spending is very low Unemployment very high Poverty results from high unemployment Great Depression of 1930’s is example

Recovery � � � � Period of renewed economic growth Follows recession or depression GDP begins to increase Business picks up People are finding jobs Increased consumer spending Moderate expansion by businesses

Class Activity � � Work with a partner to complete this class activity. Create a chart that compares and contrasts the 4 phases of the business cycle. Then, identify the phase that you think the United States currently is experiencing and justify your answer. E-mail to mbelote@lcps. org for 50 point assignment

Economic Indicators Statistics About Economic Activities – used to measure stability and health or performance of an economy � Standard of Living- The level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area � Inflation- Sustained increase in the general price level of goods and services in an economy over a period of time Unemployment Rate- The percentage of the total labor force that is unemployed but actively seeking employment and willing to work � � GDP- output of goods and services produced by labor and property within a country over a specified period of time

What is GDP? Gross Domestic Product � Output of goods and services produced by labor and property located within a country � Indicator of economic health of a country � Serves as measure of county’s productivity � Used as gauge of country’s standard of living �

What is Productivity? � Output per worker hourmeasured over a defined period of time

Ways to Increase Productivity � � � Business investment in new equipment or facilities Additional training Financial Incentives Reduce work force and increase responsibilities of other workers who remain Higher productivity improves company profits

Terms and Concepts to Know � � � Business Cycle Expansion Recession Trough Depression Recovery � � � Economic Indicator GDP Standard of Living Productivity Ways to Increase Productivity

Class Assignment � � Students will work independently or with a partner to complete this assignment Select a company and research how that business has increased productivity over recent years. Prepare a breif PPT presentation to deliver to the class that outlines the following: 100 Points Company Overview Strategies Used to Increase Productivity Investment Required by the Company Results and Impact on the Company Summary/Conclusion