Phases of the Business CycleConcept of Productivity and Impact

on Individuals and Economy

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

Follows a pattern of expansion and contraction

Expansion (Prosperity) Recession Trough (Depression) Recovery

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)

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 investA depression is a period of PROLONGED

and DEEP recession

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

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

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

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

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

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.

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

Class Assignment:Answer the following questions:1) What is meant by productivity2) How did the class experiment demonstrate

the concept productivity? What did you learn?3) How do you think that productivity is

impacted by the business cycle?4) How do you think that productivity impacts

the individual?5) How do you think that productivity impacts

the economy as a whole?