Download The Root Beer Game Debrief

THE BUSINESS
CYCLE
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Stages of the Business Cycle
• Expansion
– increased output and employment
– Increased Real GDP
– A.K.A. Recovery
• Peak
– Point of highest real GDP
• Contraction
– Increased unemployment
– Decreased output (decrease in real GDP)
– Recession – lasts longer than 6 months (2 quarters)
• Lengthy recession becomes a depression
• Trough
– Real GDP stops declining
– Unemployment stops inclining
THE BUSINESS CYCLE
The national economy fluctuates resulting in periods of
boom and bust.
Inflation
Unemployment
Full
employment
A Recession is 6 month period of decline in output, income,
employment, and trade. (If really bad…then depression)3
200 Years of the Business Cycle
1. Why is the business cycle like a roller coaster?
2. How do wars affect the economy?
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The Business Cycle
Why does the economy fluctuate?
•Retailer and Producers send misleading
information about consumer demand.
•Advances in tech, productivity, or resources.
•Outside influences (wars, supply shocks, panic).
Who cares?
•Macroeconomics measures these fluctuations and
guides policies to keep the economy stable.
•The government has the responsibility to:
• Promote long-term growth.
• Prevent unemployment (resulting from a bust).
• Prevent inflation (resulting form a boom).
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2010 GDP Growth Rate= 2.8%
What is Economic Growth?
1. An increase in real GDP over time
2. An increase in real GDP per capita over
time (usually used to determine standard of
living)
Why is economic growth the goal of every
society?
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•
•
•
Provides better goods and services
Increases wages and standard of living
Allows more leisure time
Economy can better meet wants
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Connection to PPC
The same information shown on the business
cycle can be shown on a production
possibilities curve.
1. Full employment
2. Unemployment
3. Inflation
The shifters of the PPC affect GDP
1. Change in quantity/quality of resources
2. Changes in technology
3. Changes in trade
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