Business Cycle

1. Business Cycle Section 6.2 • Turn in Review Facts 6.1

2. Quiz • Define opportunity cost and give an example. • The U.S. is an example of a command economy? Explain. • SUPPLY - As the price of goods _______, producers are willing to supply ______ of the goods. • DEMAND – As the price of a good ______, the quantity of the good demands ______ . • Labor cost are considered a variable cost. Please explain why.

3. BusinessCycle • What You’ll Learn • What the business cycle is. • What happens during economic expansions and contractions. • What business cycles have occurred in the past 80 years. • How economic indicators are used to forecast business cycles.

4. Business Cycle • Why It’s Important. Business cycles can cause sales in an industry to rise or fall.

5. BusinessCycle • Key Terms • business cycle • recession • depression • economic indicators

6. Business Cycle • Phases of the Business Cycle • Economic expansion occurs when consumer spending is strong and companies invest in new factories and equipment. • Economic contraction occurs when consumers reduce their purchases and business investment slows.

7. Business Cycle • Create a poster with a graphic representation of the business cycle.

8. Business Cycle • Recession and Depression • An economic recession occurs when the economy contracts and growth falls for two three-month periods in a row. • A depression occurs when the business activity remains far below normal for years.

9. Business Cycle • The Business Cycle in U.S. History In the 1920sFollowing the First World War, the U.S. economy expanded during a time of prosperity. In 1929The stock market crashed. The U.S. entered the Great Depression. In the 1940sWhen the U.S. entered the Second World War, the economy expanded again because of the need for increased production for the war effort.

10. Business Cycle • Economic Indicators • Leading indicators precede a change in the business cycle. • Coincident indicators occur at the same time as changes in the business cycle. • Lagging indicators occur after changes in the business cycle.

11. Business Cycle • Fact and Idea Review 6.2 1. What are the two phases of the business cycle? 2. What happens to prices and wages during an expansion? 3. In which phase of the business cycle does unemployment rise? 4. What was the longest contraction in U.S history? 5. What is a leading economic indicator?

12. Answers 6.1 Review Facts , CT • Scarcity occurs when there are not enough resources in the world for everyone to consume as much as her or she would like. • The opportunity cost is determined by the loss associated with the best opportunity that is passed up. • In a command economy, decisions regarding what to produce and how much to produce are determined by the commands given by the government, not by the demand of the consumer. • In a market economy, individuals or private companies produce what consumers want to buy. • By law of supply and demand. • Fixed cost – carpeting, rent, salary. Variable – overtime and income tax • By calculating how many unities need to be sold in order to meet all fixed and variable costs.

13. Answers to Quiz 6.1 • Opportunity Cost - the loss associated with the best opportunity that is passed up. • Choosing movie over putt-putt • False – Market Economy • As the price of a good increases, the quantity of the good demanded falls. • As the price of good rises, producers are will to supply more of the good. • Because the amount of labor needed to produce a good or service is directly dependent on the demand for a product. • More demand = more labor. • Less demand = less labor

14. Answers 6.2 Review Facts • Expansion and Contraction • Prices and wages rise • Contraction • Great Depression • Economic measures that rise or fall before other measures.

15. TEST – Tuesday • 25 Multiple Choice • Chapters 4 & 6