Business Cycle Unit 4 Macroeconomics

1. Business CycleUnit 4 Macroeconomics

2. By the end of this lesson you should know…. Essential Questions • How are unemployment, inflation and economic growth illustrated in the business cycle? Georgia Performance Standard SSEMA1 The student will illustrate the means by which economic activity is measured. a. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. e. Define the stages of the business cycle, as well as recession and depression. f. Describe the difference between the national debt and government deficits. Terms • Peak • Trough • Recession • Depression • Expansion • Contraction • Business Cycle Literacy Standards RH.11-12.2 Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas RH.11-12.3 Evaluate various explanations for actions or events and determine which explanation best accords with textual evidence, acknowledging where the text leaves matters uncertain WHST.11-12.9 Draw evidence from informational texts to support analysis, reflection, and research.

3. What is the business cycle? The business cycle is a graphic representation of the ups and downs of the economy. Peak Peak Contraction Expansion

4. What is the business cycle? Economists use data from Gross Domestic Product and plot points on a graph to create the Business Cycle. The business cycle is divided into four phases Peak Contraction Trough Expansion

5. The Phases of the Business Cycle • Peak- at this point Real GDP stops increasing • Contraction- this is a period where Real GDP in getting smaller. • Contraction that lasts for more than two quarters is called a recession • A particularly long and severe recession is called a depression Peak Contraction

6. The Phases of the Business Cycle • Trough- this is the point where the contraction period has ended and the economy is at its lowest point • Expansion- during this period the economy is experiencing growth Expansion Trough

7. How are employment and prices connected? Quick Write Think about what it means with real GDP changes. Explain what would happen with unemployment and prices at each stage of the business cycle. • Peak • Contraction • Trough • Expansion

8. How are employment and prices connected? • Peak- unemployment is at its lowest, prices are at their highest • Contraction- decreasing prices, increasing unemployment • Trough- unemployment is at its highest, prices are at their lowest • Expansion- increasing prices, decreasing unemployment

9. Can you identify and describe each phase?

10. Where are we today? Class Discussion Based on this data, determine where you think we are in the business cycle today. US Inflation Calculator http://www.usinflationcalculator.com/inflation/current-inflation-rates/ US Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/empsit.pdf

11. Now you should be able to… Answer these Questions • How are unemployment, inflation and economic growth illustrated in the business cycle? • Perform these Standards • Illustrate the means by which economic activity is measured. • Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. • Define the stages of the business cycle, as well as recession and depression. Define these Terms • Peak • Trough • Recession • Depression • Expansion • Contraction • Business Cycle Sample Questions

12. Over a two-year period, the nation of Parthia experiences a steep decline in unemployment rate, a rise in real GDP, and a stabilized price level. Parthia appears to be • at the start of a recession • in the middle of a depression • stagnating economically • in the middle of a boom period • What would you conclude about an economy characterized by increasing real gross domestic product (GDP), low unemployment, and increasing inflationary pressures? • This economy is in a slowdown. • The government needs to address the unemployment problem. • This economy is in the expansion phase of a business cycle. • The Federal Reserve should expand the money supply.

13. Answer Key • D • C

14. Resources • US Bureau of Labor Statistics News Release July 2012http://www.bls.gov/news.release/pdf/empsit.pdf • US Inflation Calculatorhttp://www.usinflationcalculator.com/inflation/current-inflation-rates/ • Economics Helphttp://www.economicshelp.org/blog/4689/economics/uk-economy-2012-forecasts/ • Georgia Department of Education’s Economics/Business/Free Enterprise EOC Assessment Guide • http://www.gadoe.org/Curriculum-Instruction-and-Assessment/Assessment/Documents/Milestones/Assessment%20Guides/GM%20Economics%20EOC%20Assessment%20Guide%20081715.pdf

15. Resources • Economics GPS Frameworks: Unit 4- “The Government and the Economy: Superhero or Villain”https://www.georgiastandards.org/Frameworks/GSO%20Frameworks/Economics%20Unit%204.pdf • Georgia Department of Education Released EOCT’s and answer keyshttp://www.doe.k12.ga.us/Curriculum-Instruction-and-Assessment/Assessment/Pages/EOCT-Released-Tests.aspx