Economic Ups
and Downs
Chapter 6.1
1991-2001
 This
was the longest continuous period of
economic growth the US has ever seen.
During this ten year span:




Those who wanted to find jobs could
The unemployment rate was the lowest in
history
The stock market soared to an all time high
Prices of good and services did not
increase significantly.
1929-1939
 This
period became the worst economic
decline in hisotry. During this time:



Many americans could not find
employment
Many were left homeless and hungery
Many factories, stores and business closed.
Business Cycles

A business cycle it the up and downs of the
economy. There are four stages to the business
cycle. They are as follows:




Contraction-During this stage business activity
slows down. IF this stage last to long the economy
could head into a recession.
Trough—this is the lowest point in the cycle, where
business activity levels off.
Expansion—The economy begins to recover.
People spend more money.
Peak-This period of prosperity marks the highest
point of the cycle. At some point the peak stage
a contraction occurs starting the cycle over again.
Recession
 This
is a period of significant decline in the
economy. These recessions usually las
from 6 month to a year.
 During this time the economy produces
much more then consumers can use.
Because of this business profits go down
requiring businesses to cut manufacturing
and layoff and fire workers.
 Consumers don’t spend money.
Depression
 This
is the downward spiral from a
recession can lead to a depression.
 A major showdown (depression) is longer
lasting and more serious then a recession.
 Demand decreases sharply, prices
plummet, many business fail and
unemployment soars.
Inflation




When the economy grows to rapidly—prolonged
rise in the prices of goods and services. It often
occurs during periods of rapid growth and
expansion.
Inflation affects consumers by reducing their
purchasing powers. Money buys fewer things.
Because inflation affects consumers who borrow,
lend or invest money, they need to consider how it
impacts interest rates. The fee paid to use
someone else’s money over a period of time.
The housing market!!!!!
Factors Affecting Ups and
Downs
 Consumer
Confidence—If people feel the
economy is facing an upward swing, they
spend more. If they feel gloomy about
the future then spending is back.
 Technological innovation—many business
spring out of new technological
innovations. These new innovations create
new markets and can transform the
economy, the workplace and the culture.
Factors Affecting Ups and
Downs Continued….
 Government
policies- Tax cuts, spending
and the regulation of the money supply
can cause the changes in the business
cycle.
 War during times of war the demands for
many goods and services associated with
the war effort increases. War is
associated with economic expansion.
Measuring the Economy’s
Health

Economic indicators—Measure production,
employment and inflation.



Gross Domestic Product—Commonly known as
the GDP, it is the total dollar value of goods and
services, produced in a county during the year.
Unemployment rate—this is the percentage of
the civilian labor force that is without a job but,
is actively seeking employment. Full
employment means less than 5.5 percent.
Consumer Price Index—measures the change in
prices over time of a specific group of goods
and services.
Connection of Local, National,
and Global Economics
 Climate
changes, natural disaster,
population shift, the availability of works,
local government policies, and the
strength of local businesses are some of
the many factors that contribute to
economic changes.
 The economies of every nation are
becoming more connected. A recession
in the United States can trigger economic
slowdowns throughout the world.