The business cycle ALPINE SKI HOUSE PRE READING 1 What is a cycle? A set of events or actions that happen again and again in the same order 2 What are some events that occur in cycles? Weather, calend.
Insert image The business cycle ALPINE SKI HOUSE PRE READING What is a cycle? - A set of events or actions that happen again and again in the same order What are some events that occur in cycles? - Weather, calendar, climate changes, time, seasons, etc Economy also moves in cycles Sometimes it grows and other times it decreases ALPINE SKI HOUSE READING EXERCISE 1 How is the business cycle defined? ALPINE SKI HOUSE Why is the business cycle important? - Because it provides the starting point for understanding the complex relationships between the various measures of macroeconomic performance and the role of government economic policy ALPINE SKI HOUSE What are the four phases of the business cycle? Expansion Peak Contraction Trough ALPINE SKI HOUSE How is economic growth characterized? - Economic growth is characterized as higher household income, lower unemployment, and higher profits for businesses What is a peak? - It is the highest point of the expansion What is a contraction? - It is the period of economic decline ALPINE SKI HOUSE What is meant by a recession? - A recession is a contraction that lasts for six months or more./ A recession is a decrease in real GDP for six months or more ALPINE SKI HOUSE When does a depression take place? - When the recession is very long and very severe, then it's referred to as a depression What is a trough? - It is the lowest point of the contraction ALPINE SKI HOUSE 10 What are the factors affecting the business cycle? - The investment by businesses - The current interest rates - Optimism - Outside sources ALPINE SKI HOUSE EXERCISE Find the antonyms of the following words in the reading passage Expansion Growth Contraction Decline Peak Trough Loss Profit Employment Simple Downward Expenditure Sell Unemployment Complex Upward Income Purchase 10 10 Pessimistic Optimistic ALPINE SKI HOUSE EXERCISE Fill in each blank with a suitable word/phrase from the above reading passage If a business cycle begins with a contraction, what is the order of the …………………………… of the business cycle? phase refers to recurrent ups and downs in the level of economic activities extending over s The business cycle several years When real GDP decreases for at least two consecutive quarters, we say that the economy is in a …………………………… recessio 11 n ALPINE SKI HOUSE The business cycle is the fluctuations in the general level of economic activity as measured by variables such …………………………… as the rate of unemployment and changes in real GDP A …………………………… is a very deep and prolonged recession Duringdepressio a contraction you would see lower household income, lower business profits, and a higher …………………………… rate n The bottom of the contraction phase is referred to as the …………………………… unemployment trough 12 ALPINE SKI HOUSE After the downturn reaches bottom and economic conditions begin to improve, the economy enters the …………………………… phase of the cycle expansion Lower …………………………… encourage consumers to borrow money – for example, to buy cars or homes, and businesses to invest and expand interest 10.A …………………………… occurs when the real GDP reaches its maximum, stop rising, and rates begins to decline peak 13 ALPINE SKI HOUSE EXERCISE What you think the correlation between changes in real GDP and the unemployment rate would be? Inverse relationship What happens to unemployment rate during periods of expansion? What happens to unemployment rate during periods of contraction? During expansion, unemployment rate will be low During contraction, unemployment rate will be high 14 ALPINE SKI HOUSE EXERCISE 15 ALPINE SKI HOUSE EXERCISE 6.TheContraction occurs thewhich nation's output falling over business cycle is when a graph shows the is level of real T time GDP over time Recessions end on their own and governments The trend line is part of the business cycle T cannot anything to stop recessions the country is achieving economic growth over the 8.Assuming The macroFeconomic objectives F are economic growth, price long-run, line will slope upwards stability the and trend low employment 9.AThe of occurs macroeconomic smooth out the bustgoal period when GDPpolicies is risingisat to a rate faster than fluctuations in the business cycle the long-run trend F 10.A business A peak marks T cycle with high peaks and low troughs the beginning of the decline in the nation's represents an economy that is highly unstable output T F 16 T T ALPINE SKI HOUSE EXERCISE (IN QUIZIZZ) The trough of a business cycle occurs when hits its lowest point A inflation B the money supply C aggregate economic activity D the unemployment rate When aggregate economic activity is increasing, the economy is said to be in …… A an expansion B a contraction C a peak D a turning point 17 ALPINE SKI HOUSE When aggregate economic activity is declining, the economy is said to be in A a contraction B an expansion C a trough D a turning point Economists use the term "business cycle" to refer to A fluctuations in real GDP over time B the amount of time businesses take to recover their fixed costs C changes in the unemployment rate caused by the hiring and firing of employees D fluctuations in firms' stock prices over time 18 ALPINE SKI HOUSE Layoffs are slow, but new hiring has not yet occurred and the unemployment rate remains high At first, business turns to overtime and temporary employees to meet rising product demands This is a characteristic of the phase A trough B expansion C peak D contraction The business cycle is not transmitted from one country to another through A private sector imports and exports B economic policy C the duration of compulsory education D labour supply changes 19 ALPINE SKI HOUSE The business cycle describes fluctuations in output around the A short-run fluctuations in output B trend path of output C expansion D contraction Business cycles are measured from A recession to recession B depression to depression C peak to peak D expansion to contraction 20 ALPINE SKI HOUSE The four phases of the business cycle are … A peak, contraction, trough and expansion B peak, recession, trough and expansion C peak, depression, trough and expansion D peak, depression, contraction and expansion 10 What is the definition of a recession? A A decrease in nominal GDP for consecutive quarters B A decrease in real GDP for at least consecutive months C A decrease in real GDP for consecutive months D A decrease in nominal GDP for at least consecutive months 21 ALPINE SKI HOUSE 11 Which of the following describes the phase of a business cycle that occurs after a trough and before a peak? A Recession B Expansion C contraction D Depression 12 Which of the following marks the beginning of a contraction in the business cycle? A Recession B Trough C Expansion D Peak 22 ALPINE SKI HOUSE EXERCISE 23 ALPINE SKI HOUSE 24 ALPINE SKI HOUSE Insert image THANK YOU ALPINE SKI HOUSE ... also moves in cycles Sometimes it grows and other times it decreases ALPINE SKI HOUSE READING EXERCISE 1 How is the business cycle defined? ALPINE SKI HOUSE Why is the business cycle important?... word/phrase from the above reading passage If a business cycle begins with a contraction, what is the order of the …………………………… of the business cycle? phase refers to recurrent ups and downs... s The business cycle several years When real GDP decreases for at least two consecutive quarters, we say that the economy is in a …………………………… recessio 11 n ALPINE SKI HOUSE The business cycle