Business Cycle, Study notes of Business

Download Business Cycle and more Study notes Business in PDF only on Docsity! Business Cycle In this lesson, students will be able to identify characteristics of the business cycle. Students will be able to identify and/or define the following terms: Business Cycle Expansion Peak Contraction Trough Do Now • What is the real GDP? –The Gross Domestic Product is the dollar value of all final goods and services produced within a country’s borders in a given year the real GDP includes inflation. Business Cycle • During a period of expansion, the economy experiences economic growth. • It experiences a steady, long-term increase in real GDP. • At the height of the expansion, the peak occurs. • The peak is the height of the expansion. Business Cycle • It occurs when real GDP stops rising. • The peak is followed by a period of contraction. • Contraction occurs when there is an economic decline marked by a fall in real GDP. • The trough is the lowest point in an economic contraction, when real GDP stops falling. • When an economy is expanding or growing, many people have jobs and many goods and services are being produced and sold. • At the peak of the expansion, Gross Domestic Product is as high as it will go for that particular business cycle. • The Great Depression was the most severe economic contraction in the history of the world. • It permanently changed the way economists think. Factors Which Affect the Business Cycle • The following four factors can affect the business cycle: –Investment in Businesses –Interest Rates –Consumer Expectations –External Shocks • The more money people invest in businesses, the more money businesses have to grow. • Investment affects the business cycle. • External shocks can be positive or negative. • An earthquake is a negative external shock. • It affects the business cycle. • Throughout American history, there have been many business cycles. Questions for Reflection: • Define the business cycle. • What are the four phases of the business cycle and explain each phase? • What are the four factors that affect the business cycle and how does each factor affect the business cycle? • What is the relationship between Gross Domestic Product and the four phases of the business cycle?