Download 7.5 Business Cycle - civisandeconomics

Welcome C&E Students!
• Grab your handouts and settle in
• Roll Call Question: What would
you rather have as a pet; a
mini horse, a pygmy goat or
a teacup pig?
Mental
Floss
Vocab
• Great Depression
• Speculation
Objective • The Crash
• Black Tuesday
7.5 • Federal Reserve Act
Identify
of 1913
the
economic • Monetary Policy
indicators • Fiscal Policy
• Reserve
of the
requirement
business
• Discount Rate
cycle
• Loose Money
• Tight Money
Questions
1. What is
CPI?
2. How are
GDP and
GNP
different?
Bell Work Answers
• The Consumer Price Index determines inflation
rate by tracking change in price of essential
goods and services
• The Gross Domestic Product determines value of
all goods and services produced within a
country’s borders while the Gross National
Product determines value of all goods and
services produced by a country
Reminders
• Unit 7 Test is Thursday!
• Unit 7.3 – 7.5 Quiz tomorrow
• Recovery is Every Tuesday, Wednesday, and
Thursday
– If you have more than 10 absences you must recover
these to pass this class!!!
• Start reviewing PowerSchool and turn in your
missing assignments
7.5 Business Cycle and
Government Intervention
identify the economic
indicators of the business
cycle
I. Phases in Business Cycle
A. Peak- when GDP stops rising, the height of
economic expansion
B. Contraction- an economic decline marked
by falling GDP, rising unemployment
1. Recession- prolonged contraction (6-18 months)
2. Depression- long and severe recession with high
unemployment, low output
C. Trough- economy at lowest point in economic
contraction
D. Expansion
1. Period of economic recovery and growth as
measured by rise in GDP
2. Business prosperity, falling unemployment
Let’s draw it!
Business Cycle Analysis
• Feel free to work with a partner
• Your group will look at several images and
descriptions.
• You must determine what part of the
business cycle it falls under
– Peak
– Contraction
– Trough
– Expansion
Poster Board Challenge
• Draw and label the business cycle
• Place the pictures on the business cycle in
the correct spot WITHOUT USING YOUR
NOTES!!!!
A: Rising house construction
D: Rising homelessness
E: Rising demand for
steel
B: The number of job
vacancies rises
C: Increasing
hours of
overtime
F: More people use
pawnbrokers
J: Rising air traffic
G: Rising quantity of mail
I: Home delivered pizza
becomes more popular
H: Slower delivery
times
K: Falling share prices
L: Rising
lipstick
sales
M: Rising real income
N. Rising car sales
R: Imports of sewing
machines rise
P: Growing mountain of unsold
bricks
Q: Fast food shops cut their prices
O: More rental housing
available
U: More skips start
appearing on the
streets
S: Increasing
supply of
credit
X: Oil refineries report
a reduction in stocks
V: Sales of milk
chocolate start to
decline
T: The cost of
shipping goods
around the world
starts to rise
Y: Citizens Advice
Bureau gets more
callers
Z: Rising
government
spending
W: Shops delivering
lunchtime sandwiches
to offices raise their
prices
A: Rising house construction
B: The number of job vacancies rises
C: Increasing hours of overtime
D: Rising homelessness
E: Rising demand for steel
F: More people use pawnbrokers
G: Rising quantity of mail
H: Slower delivery times
I: Home delivered pizza becomes more popular
J: Rising air traffic
K: Falling share prices
L: Rising lipstick sales
M: Rising real income
N. Rising car sales
O: More rental housing available
P: Growing mountain of unsold bricks
Q: Fast food shops cut their prices
R: Imports of sewing machines rise
S: Increasing supply of credit
T: The cost of shipping goods around the world starts to rise
U: More skips start appearing on the streets
V: Sales of milk chocolate start to decline
W: Shops delivering lunchtime sandwiches to offices raise their prices
X: Oil refineries report a reduction in stocks
Y: Citizens Advice Bureau gets more callers
Z: Rising government spending
Poster Board Challenge
• Place the number of the following
scenarios in the correct place in the
business cycle.
Poster Board Challenge
A. Economy
B. Economy
C. Economy
D. Economy
is
is
is
is
getting better
at its highest point
going down
at it’s lowest point
B
A
C
D
Poster Board Challenge
A. Business is in full swing
B. GDP is decreasing
C. GDP is at it’s lowest point
D. GDP is increasing
A
D
B
C
Poster Board Challenge
A. People are getting laid off
B. Interest rates are high
C. People are getting back to work
D. Interest rates are low
B
C
A
D
Poster Board Challenge
A. Unemployment
B. Unemployment
C. Unemployment
D. Unemployment
is
is
is
is
increasing
decreasing
an all time high
an all time low
D
B
A
C
II. Economic Low Points
• A. The Great Depression – deepest and
longest-lasting economic downturn in the
history of the Western world.
• 1. Signs of Trouble
• a. large gap between rich and poor
• b. large portion of Americans were going
into debt to buy consumer goods
2. Other Causes
• a. Investing
• (1). 1925-29 stocks tripled in value
• (2). Climb encouraged speculation –
making investments with borrowed money
• (3). Unfortunately most speculators ended
up losing all the borrowed money and
then some
• b. The Crash
• (1). Black Tuesday (1929) – huge sell
off of all stocks that led to fear that all
banks would fail
• (2). Massive amounts of people began
emptying their bank accounts, caused
banks to fail
• 3. Aftermath
• a. Falling prices led to deflation and
eventually massive unemployment
• b. Large trade tariffs are placed on all
foreign goods to protect domestic industry
II. Creation of “The Fed”
A. Federal Reserve Act of 1913- created
the Federal Reserve
1. After getting off gold standard, needed
federal bank to respond to economy
2. Purpose is to regulate/support banks,
control money supply, and stabilize
economic growth
B. Operates mostly
independently from the
government
C. Chairman, Board of
Governors, 12 Districts
II. Monetary Policies
A. Monetary Policy- actions The Fed takes to
influence level of GDP (value of economic
activity in the country) and rate of inflation
B. Fiscal Policy – the federal government’s use
of spending and taxation policies to affect our
economy
C. Reserve requirement- amount of money
banks must keep in Fed banks as a reserve
D. Discount rate- cost for banks borrowing
from the Fed
1. Reducing the rate- encourages banks to borrow
more money so they lend more to other people
2. Increasing the rate- slows down economy by
discouraging borrowing
E. Fed Policies
1. Loose-money policy- reduce rates, lower reserve
requirement, print currency= more money in
economy
2. Tight-money policy- increase rates, raise reserve
requirement= less money in the economy
Inside the Fed
• We will be watching a film on the Federal
Reserve
• You will complete a 3-2-1 for this activity
• 3 things you learned
• 2 questions you still have questions about
• 1 interesting fact from the film
• https://www.youtube.com/watch?v=I2m3t
2Yr8Vg
Economics BINGO!
Homework
• Find and print an article about inflation,
deflation, monetary policy, or the Federal
Reserve
• Underline/highlight any economics terms
you know
• Circle any terms or concepts you don’t
understand
Desk Work
Read p. 663-665 and answer the
following questions:
1. What does the Federal Reserve do?
2. How does monetary policy affect the
economy?
3. What do you think the Fed is doing
or should be doing to help our
current economy?
Welcome C&E Students!
• Grab today’s handout and settle in
• Roll Call Question: Would you rather be a
hamster the size of a Rhino or a Rhino the
size of a hamster?
• Bell Work
– How can we identify the 4 phases of the
business cycle?
– What were the main causes of the Great
Depression?
Bell Work Answers
• Peak – height of economic expansion –
GDP stops rising
• Contraction – falling GDP, rising
unemployment
• Trough – lowest point of contraction
• Expansion – economic recovery and rising
GDP
• People going into debt to by consumer
goods, speculation in stock market and
eventually the stock market crash
Reminders
• Unit 7 Test is next Wednesday!
– Study Guide
• Recovery is Every Monday, Tuesday and
Thursday
– If you have more than 10 absences you must
recover these to pass this class!!!
• Start reviewing powerschool and turn in
your missing assignments
• Extra credit due Next Wednesday!