The Business Cycle
An Economic Concept
Objectives
 Define the business cycle
 Explain the four stages of the business cycle
 Examine causes of the business cycle
The Business Cycle
 The cycle of economic growth & decline of an economy
There are FOUR stages:
 Prosperity
 Recession
 Depression
 Recovery
Peak
 The high point of the
economic prosperity
 The top of the business cycle
 Customers are hopeful
about the future
 They increase their level of
spending
Also Known as Prosperity
Contraction
 Demand starts to fall
 The peak has passed
 Considered “bad times” for businesses
 Fewer sales and less profit is being made
 People start to lose their jobs
Also Known as Recession
Trough
 Recession lasting years
 Effects entire economy
 Economic activities stop their decline
 The low point of economic activity: low profits
 Businesses begin to fail
 People continue to lose jobs
Also Known as Depression
Expansion
 The growth part of the cycle
 Rise in business activity after a
recession or depression
 Consumers have a hopeful outlook
about business and the economy
 Demand is increasing
Also Known as Recovery
The Business Cycle
Some Causes of the Business Cycle
 Government Regulations
 Consumer Behaviors
Checkpoint Activity
 Can the SER industries profit during:
 A recession? Explain.
 A depression? Explain.
 How can consumer behaviors affect the business
cycle? What effects might this have on the SER
industries?
 What SER industries might continue to do reasonably
well during a recession?