Phases of the Business Cycle Concept of Productivity and Impact on Individuals and Economy
Dec 31, 2015
Phases of the Business CycleConcept of Productivity and Impact
on Individuals and Economy
Recurrent fluctuations in the economic indicators (such as GDP, inflation, unemployment, standard of living)
Periods of expansion(growth) and contraction (slow down)within the national economy
Sometimes called an “economic cycle” or “trade cycle”
Four distinct phases of the business cycle
Follows a pattern of expansion and contraction
Expansion (Prosperity) Recession Trough (Depression) Recovery
Also called Prosperity Unemployment is LOW Consumer confidence and spending
are HIGH Businesses prosper and invest in new
product development/research A peak marks the end of this phase
and the beginning of the next phase (heading back into recession)
The economy slows down Businesses lay off workers Consumer confidence and spending
are LOW Low demand causes decrease in
production of goods and services Businesses have little money to investA depression is a period of PROLONGED
and DEEP recession
Low point in the business cycle Marks the transition from recession to
recovery The economy stops slowing and
shows signs that a recovery is near
The economy begins to grow Jobs are created and consumers
begin to spend Higher consumer demand leads to
increased production of goods and services
Recovery may last a long time
Actions of Businesses- Businesses expand and contract in
reaction to the business cycle High investment (properties, people,
inventories, expand operations) during Expansion
Lay off workers, cut back inventories during recession or depression
Creates RIPPLE effect throughout economy
Actions of CONSUMERS Fear of job loss and/or decrease in
wages result in low consumer confidence
Spend less money Impacts businesses who then have to
reduce their operations due to low demand
Opposite is true during periods of Prosperity
Government Government policies and programs
influence business cycle Increased taxes to run government
programs means less money for consumers to spend- which means less spending, less demand, and impacts business
Lowering interest rates and reducing taxes can often boost a struggling economy
A measure relating a quantity or quality of output to the inputs required to produce it.
Output refers to product (good/service) Input refers to the worker hours/time to
create the product A measure of the output of a worker,
machine, or an entire national economy in the creation of goods and services to produce wealth.
Divide into groups of 3-4 people Design a paper airplane to produce in
class. Develop the product name and price
Produce as many airplanes as possible within the specified amount of time.
When time is called, assess the productivity of your operation
The class will examine the products for quality; identify which team produced the most; draw conclusions about worker productivity
Class Assignment:Answer the following questions:1) What is meant by productivity2) How did the class experiment demonstrate
the concept productivity? What did you learn?3) How do you think that productivity is
impacted by the business cycle?4) How do you think that productivity impacts
the individual?5) How do you think that productivity impacts
the economy as a whole?