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Economics and Business Impact. Phases of the Business Cycle Concept of Productivity and Impact on Individuals and Economy. Business Cycle. Recurrent fluctuations in the economic indicators (such as GDP, inflation, unemployment, standard of living)

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economics and business impact

Economics and Business Impact

Phases of the Business Cycle

Concept of Productivity and Impact on Individuals and Economy

business cycle
Business Cycle

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

four phases of business cycle
Four Phases of Business Cycle

Follows a pattern of expansion and contraction

Expansion (Prosperity)

Recession

Trough (Depression)

Recovery

expansion
Expansion

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)

recession
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

trough
Trough

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

recovery
Recovery

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

factors affecting business cycles
Factors Affecting Business Cycles

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
factors affecting business cycle
Factors Affecting Business Cycle

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

factors affecting business cycle1
Factors Affecting Business Cycle

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
concept of productivity
Concept of Productivity
  • 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.
class experiment
Class Experiment
  • 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
conclusions from experiement
Conclusions from Experiement
  • Class Assignment:

Answer the following questions:

  • What is meant by productivity
  • How did the class experiment demonstrate the concept productivity? What did you learn?
  • How do you think that productivity is impacted by the business cycle?
  • How do you think that productivity impacts the individual?
  • How do you think that productivity impacts the economy as a whole?