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CP Economics (Chapter 12, #2) GPS SSEMA1e Name ______________________________ Date ___________________ Period______ Business Cycle Warm Up #25- The Business Cycle Figure 12.6 on page 359 1. 2. 3. I. 5 Key Economic Indicators A. Gross Domestic Product (GDP) B. ____________________________________ C. The Unemployment Rate D. Inflation E. Consumer Price Index (CPI) II. What is the Business Cycle? A. KEY CONCEPTS 1. Changes in the ________________________________ often follow a broad ______________________________: 2. _____________________________ _______________________- series of periods of expanding and contracting activity i. Measured by increases or decreases in real GDP 3. Has ___________________________ phases: ii. ___________________________ iii. Peak iv. __________________________ v. Trough (length can vary) B. Stage 1: Expansion 1. Expansion is a period of ______________________ __________________- increase in real GDP i. real GDP ____________________ from a low point, or trough 2. During an expansion i. ______________ easier to find; unemployment drops ii. More _____________________________ needed to keep up with spending demand iii. as resources become scarce, their ______________________ ___________________ C. Stage 2: Peak 1. _______________________ is point at which real GDP is __________________________ 2. As prices rise and resources _____________________________, businesses become less profitable i. ______________________________ ____________ ______________ production and real GDP drops D. Stage 3: Contraction 1. During ________________________________, producers cut back and _________________________ __________________ i. resources become less scarce, so prices tend to stabilize or fall 2. _______________________________- contraction lasting two or more quarters 3. Depression- long period of high unemployment and limited business activity 4. _______________________________- stagnation in business activity with inflation of prices E. Stage 4: Trough 1. ____________________________ is point which real GDP and employment _____________ ________________________ 2. A business cycle is ___________________________ when it has gone through _________ four _____________________ III. Predicting Business Cycles A. KEY CONCEPTS 1. ____________________________ business cycle _____________________- measures for predicting changes in i. help business and government make ________________________ _____________________ 2. ____________________________ _________________ real GDP _____________________- measures that usually change 3. ____________________________ ______________________- measures that usually change at ______________ __________ as real GDP 4. ___________________________ ______________________- measures that usually change ________________ real GDP