The Business Cycle
Business, Computers,
& Information
Technology
Unit 2 Chapter 26
REVIEW
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Define Macroeconomics
What are the 3 economic goals that all countries have
Identify the 4 key parts of the definition of GDP
How do we use GDP?
Explain Real GDP per Capita
Identify what is NOT included in GDP
List the 4 components of GDP Expenditure Approach
Explain the difference between Nominal and Real
GDP
9. Explain the difference between GDP Deflator and
Price Index
10.Name 10 Winter Olympic sports
Paul Solman Video:
The Business Cycle
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THE BUSINESS CYCLE
The national economy fluctuates resulting in periods of
boom and bust.
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Inflation
Unemployment
?
Full
employment
A Recession is 6 month period of decline in output, income,
employment, and trade. (If really bad…then depression)
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200 Years of the Business Cycle
1. Why is the business cycle like a roller coaster?
2. How do wars affect the economy?
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The Business Cycle
Why does the economy fluctuate?
•Retailer and Producers send misleading info
about consumer demand (ie demand shocks)
•Advances in tech, productivity, or resources.
•Outside influences (wars, supply shocks, panic).
Who cares?
•Macroeconomics measures these fluctuations and
guides policies to keep the economy stable.
•The government has the responsibility to:
• Promote long-term growth.
• Prevent unemployment (resulting from a bust).
• Prevent inflation (resulting from a boom).
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US Real GDP Growth Rate
2014 GDP Growth Rate = 2.2%
What is Economic Growth?
1. An increase in real GDP over time
2. An increase in real GDP per capita over
time (usually used to determine standard of
living)
Why is economic growth the goal of every
society?
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Provides better goods and services
Increases wages and standard of living
Allows more leisure time
Economy can better meet wants
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Connection to PPC
The same information shown on the business
cycle can be shown on a production
possibilities curve.
1. Full employment (B)
2. Unemployment (D)
3. Inflation (E)
The shifters of the PPC affect GDP
1. Change in quantity/quality of resources
2. Changes in technology
3. Changes in trade
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