ssema1 the student will illustrate the means by which economic activity is measured. e. define the...
TRANSCRIPT
![Page 1: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/1.jpg)
![Page 2: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/2.jpg)
SSEMA1 The student will illustrate the means by which economic activity is measured.
E. Define the stages of the business cycle; include peak, contraction, trough, recovery, expansion as well as recession and depression.
![Page 3: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/3.jpg)
Business cycles• Systematic
changes in real GDP marked by alternating periods of expansion and contraction.
• Or- the economy has highs and lows
![Page 4: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/4.jpg)
Phases of the Business Cycle• Recession: Real GDP
declines (contraction), unemployment rises for 2 quarters (6 months)
• Begins at the peak: point where economy stops going up
• Ends at the trough: the point where economy stops going down –or-turnaround point
![Page 5: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/5.jpg)
Phases of the Business Cycle• Recovery: when real GDP
becomes positive after a period of negative GDP.
• Expansion: period of recovery from a recession.
• Trend line: a steady growth path.
• Depression: a severe recession.
• Has large unemployment, acute shortages, excess capacity in manufacturing.
![Page 6: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/6.jpg)
Phases of the Business Cycle• Contractions: typically GDP
decreases and cyclical unemployment increases
• The economy shrinks, unemployment increases, reduced spending.
• To ease impact of recession = government cut taxes
• Expansions: typically production increases and resources are being utilized.
• GDP increases, unemployment decreases, inflationary pressure rises.
![Page 7: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/7.jpg)
Fiscal Policy• Fiscal Policy: The federal
government’s attempt to stabilize the economy through taxing and government spending
• Used in demand-side policies
• Designed to increase/decrease total demand by shifting the AD curve to the left/right
![Page 8: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/8.jpg)
Keynesian Economics• Keynesian Economics = a set of
actions designed to lower unemployment by stimulating AD.
• Theories by John Keynes in 1936.• Said business sector most influence
on stability of economy• GDP = C + I + G + NX• C = big, but most stable• G = important, but over time
normally stable• NX = too small for influence• I = affects jobs, spending patterns,
allocation of resources, etc.
![Page 9: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/9.jpg)
Factors
• Multiplier = a change in investment spending will have a magnified effect on total spending
• Accelerator = change in investment spending caused by a change in total spending.
• after decline begins, investment spending drops more.
• Results in downward spiral• Contributes to instability of GDP
![Page 10: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/10.jpg)
Causes of the Business Cycle• Capital Expenditures:• Expanding economy
= businesses expect future sales to be high so they invest in new plants, machinery, etc.
• When they have enough, they stop buying, this causes layoffs, leads to a recession.
![Page 11: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/11.jpg)
Causes of the Business Cycle• Inventory
Adjustments:• First sign of trouble,
some businesses cut back on inventories
• Possible a self-fulfilling prophecy
• First sign of recovery, build back up
• Clearest after WWII
![Page 12: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/12.jpg)
Causes of the Business Cycle• Innovation and Imitation:• Innovation: puts new
products on the market• Innovation: makes other
products obsolete• Innovation: businesses more
efficient = costs go down, profits increase, business grows.
• Imitators invest heavily to catch up, investment boom follows
• Market stabilizes, boom ends
![Page 13: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/13.jpg)
Causes of the Business Cycle• Monetary factors:• Credit and loan policies
of Federal Reserve System
• Easy money policies = low interest rates, loans easy to get
• Borrowing and lending slow down, economic activity declines.
• 2007 bubble burst
![Page 14: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/14.jpg)
Causes of the Business Cycle• External Shocks:• Increase in oil prices• Wars• International
conflict• Some drive
economy up• Others drive
economy down
![Page 15: SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,](https://reader036.vdocuments.us/reader036/viewer/2022070418/5697bfd51a28abf838cad669/html5/thumbnails/15.jpg)
Government’s Role• Uses fiscal policy to manage
spending and taxing.• Responsible for implementing
fiscal policy• i.e. government would lower
taxes in expansionary fiscal policy
• Decrease taxes to combat long period of GDP
• To decrease inflation, gov. may cut programs, benefits
• i.e. cuts spending on NASA to help decrease inflation