UNDERSTANDING ECONOMICSPART II

#53- Describe the phases of the business cycle#54- Explain the concept of gross domestic product#55- Explain productivity and its effects on individual businesses and the economy as a whole

Phases of the Business Cycle

Recurring changes in economic activity History shows that sometimes an

economy grows (expansion) and sometimes is slows down )contraction)

Economies have followed the patterns Sometimes called “Economic Cycle” Four patterns: Expansion, Recession,

Trough-Depression, Recovery

Business CycleRecovery Expansion Recession Trough

Expansion Economy is flourishing Sometimes referred to as “prosperity” Nationwide low unemployment Increase in output of goods and services High consumer spending Good time for new businesses to start

up/expand Expansions continues until it reaches a

“Peak” “Peak” ends expansion and begins

“recession”

Recession

Period of economic slow down Lasts for at least two quarters (or 6 months) Businesses reduce work force Consumers have less money to spend Producers make fewer goods and services Research and development is cut back/

business expansion put on hold Can end quickly or last a long time End is signified by “trough”- lowest point in

the recession

Trough

Lowest point in business cycle Marks transition from recession to

recovery period Economy stops slowing and shows signs

that recovery is near

Depression Prolonged recession Nearly impossible to

find a job Businesses shut down Spending is very low Unemployment very

high Poverty results from

high unemployment Great Depression of

1930’s is example

Recovery

Period of renewed economic growth Follows recession or depression GDP begins to increase Business picks up People are finding jobs Increased consumer spending Moderate expansion by businesses

Class Activity

Work with a partner to complete this class activity.

Create a chart that compares and contrasts the 4 phases of the business cycle.

Then, identify the phase that you think the United States currently is experiencing and justify your answer.

E-mail to mbelote@lcps.org for 50 point assignment

Economic IndicatorsStatistics About Economic Activities – used to measure

stability and health or performance of an economy

Standard of Living- The level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area

Inflation- Sustained increase in the general price level of goods and services in an economy over a period of time

Unemployment Rate- The percentage of the total labor force that is unemployed but actively seeking employment and willing to work

GDP- output of goods and services produced by labor and property within a country over a specified period of time

What is GDP?

Gross Domestic Product Output of goods and services produced

by labor and property located within a country

Indicator of economic health of a country

Serves as measure of county’s productivity

Used as gauge of country’s standard of living

What is Productivity?

Output per worker hour- measured over a defined period of time

Ways to Increase Productivity

Business investment in new equipment or facilities

Additional training Financial Incentives Reduce work force and increase

responsibilities of other workers who remain

Higher productivity improves company profits

Terms and Concepts to Know

Business Cycle

Expansion Recession Trough Depression Recovery

Economic Indicator

GDP Standard of

Living Productivity Ways to Increase

Productivity

Class Assignment Students will work independently or with a partner to

complete this assignment Select a company and research how that business has

increased productivity over recent years. Prepare a breif PPT presentation to deliver to the class

that outlines the following: 100 Points

Company OverviewStrategies Used to Increase Productivity Investment Required by the Company Results and Impact on the Company

Summary/Conclusion