Phases of the Business Cycle
Concept 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 invest
A 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 productivity
2) 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?