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Business Cycle & Circular Flow Model

Business Cycle & Circular Flow Model. RECOVERY. PRODUCTION INCREASES PEOPLE GO BACK TO WORK SPENDING INCREASES DEMAND STIMULATES PRODUCTION BUSINESSES MAY START TO INNOVATE A NEW PRODUCTS PROFITS INCREASE, BUSINESS GROWS, ECONOMIC ACTIVITY SOARS. PROSPERITY. LOW UNEMPLOYMENT

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Business Cycle & Circular Flow Model

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  1. Business Cycle & Circular Flow Model

  2. RECOVERY • PRODUCTION INCREASES • PEOPLE GO BACK TO WORK • SPENDING INCREASES • DEMAND STIMULATES PRODUCTION • BUSINESSES MAY START TO INNOVATE A NEW PRODUCTS • PROFITS INCREASE, BUSINESS GROWS, ECONOMIC ACTIVITY SOARS

  3. PROSPERITY • LOW UNEMPLOYMENT • PRODUCTION IS HIGH • NEW BUSINESSES OPEN • HIGHER WAGES • HIGH DEMAND FOR GOODS AND SERVICES

  4. RECESSION • SPENDING DECREASES • DEMAND FOR PRODUCTS DECREASE • BUSINESSES PRODUCE LESS • UNEMPLOYMENT INCREASES • GDP DECLINES • PRICES INCREASE • (INFLATION SETS IN)

  5. DEPRESSION • HIGH UNEMPLOYMENT • LOW PRODUCTIVITY • A DEEP DEPRESSION AFFECTS THE ENTIRE ECONOMY AND LAST FOR SEVERAL YEARS

  6. Ripple Effect http://www.youtube.com/watch?v=QQ37RLXNAgc

  7. Ripple Effect • Throw a stone into a serene lake and you’ll create a ripple effect in the water

  8. We have determined the health of our economy to be… • Healthy • A little sick • So-so • Mostly unhealthy • Extremely unhealthy

  9. Does the economy seem better or worse than last year? • How has the downturn affect you? Your family? • What have you noticed in the community that shows the health of the economy? • What have you noticed in the community that may prove or show it may be getting healthier?

  10. Ripple Effect • Throw a major change at a large employer and you’ll create a ripple effect in the economy

  11. What would be the ripple effect if… A large auto factory that employed more than 1,000 people closed in Belvidere, IL. Population 28,350. • What effect would it have on the community?

  12. BUSINESSES GOVERNMENT INDIVIDUALS CIRCULAR FLOW MODEL

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