Bell Activity
• Last year, the President said, “Right now, a company can get a tax break for moving a plant over-seas.”
• Which part(s) of GDP would this affect?
• How would the overall GDP be affected?
Cycle
• What is a cycle?• Any complete round, or series of occurrences that
repeats or is repeated
• Where are there cycles in our lives?• Carbon cycle, water cycle, nitrogen cycle, life cycle
The Business Cycle
• The movement of the economy from one condition to another and back again
• (the ups and downs of GDP)
Prosperity
Recession
Depression
Recove
ry
Prosperity
– Low Unemployment– High Demand for goods and services– High Productivity– Called a “boom” period
Prosperity
Recession
– Decrease in Demand for goods– Decrease in Productivity– Rise in Unemployment
Recession
Ripple Effect
Depression
• A prolonged recession that spreads to multiple sectors of our economy– High Unemployment– Low Demand for goods and services– Low Productivity
Depression
Recovery
– Jobs begin to increase (lower unemployment)– Demand for goods and services increase– Productivity increases
Recove
ry
Which Phase?
• High employment, increasing wages, more new or expanding businesses
• Prosperity
• Consumer demand increases due to lower unemployment
• Recovery
• GDP falls for a prolonged period of time due to overwhelming Unemployment
• Depression
• Rising Unemployment, unsold goods, falling prices• Recession
Ripple Effect
• The Great Depression was caused by a fall in spending.
• What does this statement mean?
Ripple Effect
• In the 1920’s• Consumers for the first time could buy houses and
cars on an installment plan• These purchases created jobs
– Building houses and cars– Furniture and appliances to fill houses– Production of steel and other materials for houses/cars– New plants, facilities and equipment
• Governments built paved roads for the new automobiles and electric plants and water and sewage facilities to service the new households
Ripple Effect
• The prosperity of workers in all these industries allowed them to spend a lot of money, thus providing income to other workers — income which they in turn spent to buy other goods and services.
Ripple Effect
• At the end of the 1920’s• Business firms slowed their expansion of new
plants and machinery
• If you work in a factory producing machinery…
• STAND UP – you are now unemployed because companies are spending less on machinery
Ripple Effect
• At the end of the 1920’s• Sales new automobiles began to fall
• If you work selling cars…• STAND UP – you are now unemployed because
sales of new cars are down
Ripple Effect
• Because car sales fall• Car dealers cancel orders from car manufacturers• Manufacturers lay off employees due to decrease
in production
• If you are an autoworker…• STAND UP – you are now unemployed because
demand for new car production is down
Ripple Effect
• Because manufactures slow down production of new cars
• Auto factories cancel their orders for steel and other raw materials used to make cars
• If you work as a steel worker• STAND UP – you are now unemployed because
the demand for steel is down
Ripple Effect
• At the end of the 1920’s• Sales of homes began to fall
• If you work in Construction • STAND UP – you are now unemployed because
new house development declines
Ripple Effect
• Because home sales are down• Furniture sales are down
• If you work in furniture sales• STAND UP – you are now unemployed
• Because furniture sales are down• Orders for furniture manufacturing are down
• If you work in a furniture factory• STAND UP – you are now unemployed
Ripple Effect
• Look at all the unemployed people
• Those of you still employed…• Are you nervous for your jobs?
• Unemployed people don’t buy new things
• If you work selling clothes• STAND UP – you are now unemployed
Ripple Effect
• People who are unemployed don’t eat at restaurants
• If you work in a restaurant• STAND UP – you are now unemployed
Ripple Effect
• Unemployed people don’t buy expensive food items– This means lower profits for grocery stores
• If you work at a grocery store• STAND UP – you are now unemployed due to a
decrease in profits
Ripple Effect
• But bad economic times don’t last forever
• Goods wear out making it necessary for consumers to buy new goods ex. Cars
• If you work in car sales • SIT DOWN – you are reemployed
Ripple Effect
• Because more cars are being sold• Orders to the manufacturer increase• Orders to the steel manufactures increase
• If you work in car or steel manufacturing• SIT DOWN – you are now reemployed
Ripple Effect
• When more people are employed • More new homes are built
• If you work in construction• SIT DOWN – you are now reemployed
• If you work in furniture sales and production• SIT DOWN – you are now reemployed
Ripple Effect
• When more people are employed• More people eat out, buy new clothes, and higher
priced groceries
• If you work at a restaurant, grocery store, or selling clothing
• SIT DOWN – you are now reemployed