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Business Cycle

Business Cycle. Measuring Economic Activities. Gross Domestic Product (GDP): The total market value($ value) of all the goods and services produced within the borders of a nation during a specified period. Usually reported on an annual basis

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Business Cycle

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  1. Business Cycle

  2. Measuring Economic Activities • Gross Domestic Product (GDP): The total market value($ value) of all the goods and services produced within the borders of a nation during a specified period. • Usually reported on an annual basis • Per Capita GDP: A nations GDP divided by its population • Consumer Price Index (CPI): Calculated each month by the Bureau of Labor Statistics • Price index determined by measuring the prices of a “market basket” • Ex. Food, housing, medical care, entertainment

  3. A business cycle is not a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock. • Its timing is random and unpredictable. A business cycle is identified as a sequence of four phases.

  4. Phases of the Business Cycle • Expansion (A speedup in the pace of economic activity) Rise in real GDP • Recovery: right after a trough, economy is getting better • Prosperity: right before a peak, economy is at its best • economic growth • Contraction (A slowdown in the pace of economic activity) • Economic decline marked by falling GDP • Recession: 6 straight months of contraction • Depression: Especially long contraction

  5. Phases of the Business Cycle • Trough (The lower turning point of a business cycle, where a contraction turns into an expansion) • GDP stops falling • Peak (The upper turning of a business cycle) • When GDP stops rising **A trough and peak both represent a turning point in the business cycle**

  6. Business Cycle Continued… • Where we are in a given business cycle affects our lives every day. If the economy doesn’t create enough jobs, high school & college graduates have trouble finding work. • If prices rise, but incomes do not, our ability to buy what we need declines.

  7. National Debt http://brillig.com/debt_clock/ • http://www.usdebtclock.org/

  8. National Debt • The National Debt is the total amount of money the Federal Government owes to bondholders. • The debt is owed to investors who hold treasury bonds. If you invest in a treasury bond, the money that one uses to buy the bond is used to finance the National Government. • A bond is essential an IOU issued by the government as a way for them to borrow money.

  9. Problems of the National Debt • Reduces the funds available for businesses to invest. • The government must pay interest to bondholders, the more the government borrows, the more interest it has to pay. • Roughly, to pay off the National Debt today, each citizen would have to pay just over $40,083.53

  10. When President Bush took office over 10 years ago, the national debt was at $5.6 trillion; since then, big budget surpluses have collapsed into huge deficits, and the debt has shot up more than 50 percent.

  11. Business Cycle Activity • Please create the business cycle for the following items on a separate sheet of paper… • Ski Boots • Sun screen • Wool socks • Sandals • Summer Shorts

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