ECONOMICS GRADE 10 EAC DEVELOPMENT CONTENT OF SCRIPT

Subject : Economics Grade 10Topic: Business Cycles - Reasons for business cycles: explanation and illustration of their composition and noting their impact on the

economically vulnerableLesson – Content

Language aspects coveredPre-Activities

VocabularyACTIVITY 1: Teacher introduces the following terms to the learners- Listening and Speaking

Break down of termsWhat is a cycle? What is an upswing?What is a downswing?Give another word for peak?What is a trough? What is a boom? What is lagging? What Is leading? What Is coincident?What are indicators? What is endogenous? Prefix ENDO -internalWhat is exogenous? Prefix EXO - external

SYNONYMS for following words (as a guide for the learners)What is a cycle? Rotation / sequence/ phaseWhat is an upswing? Pick-up/ increase / improvementWhat is a downswing? Decline / slump/ downturnGive another word for peak? Top/ highest pointWhat is a trough? Trench / gutter (lowest point)What is a boom? Explosion / prosper/ flourishWhat is lagging? Lag / hold-up /delayWhat Is leading? Lead / in front/ aheadWhat Is coincident? Corresponding / same timeWhat are indicators? indicator / shows direction/ measure

What is endogenous? Prefix ENDO -internalWhat is exogenous? Prefix EXO - external

ACTIVITY 2 Think about the following subject terminology; based on responses from above and expands on the subject terminology - Listening and Speaking What does a Business Cycle mean? Describe the following terms related to Business Cycles:

indicators lagging indicators leading indicatorscoincident indicatorsupswing (expansion)downswing (contraction)prosperityboomrecessiondepressionfiscal policymonetary policyinjectionsleakagesStandard of living

VIDEO ON THE BUSINESS CYCLE

Listening and watching activityReference: https://youtu.be/6XpXsC-yNHI

Illustration- Showing

Drawing of the business cycle - various points and phases.

The learner can copy the above and practice drawing of the business cycle, and explain it to some one in class or ay home, using the correct terminology

Language in the SubjectConceptualisation

ACTIVITY 3 - WritingActivity below completed for homework by the learners.

Introduction of TOPIC Match the description in Column B with the concept in Column A: Write down only the number and the corresponding letter. E.G 1 –ACONCEPT DEFINITION

1. Business cycle A. Increase in economic activities and an upward movement along the business cycle

2. Recession B. Slowdown in the economic activities over time

3. Trough C. Forces outside that markets causing fluctuating economic activities

4. Upswing/expansion phase

D. Decrease in economic activities and a downward movement along the business cycle

5. Trend line (path) E. These activities take place simultaneously with the changes in the economy. These indicators change with the cycle.

6. Coincident indicator F. Economic activities are at its highest point. It signals the end of the expansion phase. From this point the contraction phase starts

7. Prosperity phase G. This can be described as consecutive periods of increasing and decreasing of economic activity of a country.

8. Peak H. Forces inside the market causing fluctuating economic activities9. Amplitude I. The economy has recovered and is accelerating in terms growth10. Depression J. Severe slowdown of economic activities, the economic growth get close to zero11. Lagging indicator K. An indication that an increase in economic activities has started12. Recovery phase L. Latter part of the prosperity phase. Economic activities are at the extreme13. Economic indicator M. The distance between the trend line and the peak and trough14. Exogenous factors N. A line indicating the general direction of economic activity over the long term15. Downswing/contraction

O. Economic activities are at its lowest point. It signals the end of the contraction phase. It is a turning point indicating the start of the expansion phase

16. Boom P. It is an indicator that shows or suggests how an economy is likely to behave17. Keynesian view Q. These indicators reach a peak before economic activities peaks or reach a trough before

economic activities reaches a trough.18. Endogenous factors R. Stipulate that endogenous reasons cause economic fluctuations. Markets are inherently

unstable. Government intervention is necessary.19. Interventionist view/ Monetarist view

S. These activities confirm that economic activities have taken place. In other words, it confirms the state of the economy. These indicators change after the cycle turned.

20. Leading indicator T. Stipulate that exogenous reasons cause economic fluctuations. Inappropriate government policies, weather and structural changes in the economy cause business cycles

Solutions: Teacher to do correction with the learners the next day – Listening 1. – G 11. - S2. – B 12. - K3. – O 13. - P4. – A 14. – C5. – N 15. - D6. - E 16. - L7. - I 17. - R8. – F 18. - H9. – M 19. - T10. – J 20. – Q

LESSON CONTENT: Listening and SpeakingDefinitionBusiness Cycles can be described as continuous periods of increasing and decreasing of economic activity of a country, having repetitive patterns of expansion and contraction in production, income and consumption.- These activities are described by indicators- An indicator points or signals direction.- Example: if retails sales increase, a growing economy is expected (expansionary phase)- If retails sales decrease, a declining economy is expected (contractionary phase)

The definition has certain important implications:Continuous: The business cycle takes place over a long time, the concern is more about the trend than the short term fluctuations.Level of Economic activity: in order to measure the change, economists measure the change in GDP on a year on year basis.Repetitive pattern: the patterns repeating (doing the same thing) themselves over time.Expansion: Increase in Economic activity over time (or GDP).Contraction: Decrease in Economic activity over time (or GDP).Trend line: This is the long term path that the economic activities follow; the trend could either be upwards, or downwards.

DIAGRAM OF THE BUSINESS CYCLE

CYCLICAL PATTERNS (PHASES OF BUSINESS CYCLES)(1) UPSWING/EXPANSION PHASEIncrease in economic activities and an upward movement along the business cycle.• Recovery phase- An indication that an increase in economic activities has started.• Prosperity phase- The economy has recovered and is accelerating in terms growth.• Peak- Economic activities are at its highest point. It signals the end of the expansion phase. From this point the contraction phase starts.(Take note: the peak is NOT a phase, but a point on the business cycle)

(2) DOWNSWING/CONTRACTION- Decrease in economic activities and a downward movement along the business cycle.• Recession- Slowdown in the economic activities over time.

• Depression- Severe slowdown of economic activities, the economic growth gets close to zero.• Trough- Economic activities are at its lowest point. It signals the end of the contraction phase. It is a turning point indicating the start of the expansion phase.(Take note: the trough is NOT a phase, but a point on the business cycle)

There are THREE types of indicators:(1) Leading indicators- These indicators reach a peak before economic activities peaks or reach a trough before economic activities

reaches a trough.- Leading indicators change before the cycle turned.- Example: number of new cars sold(2) Coincident indicators- these activities takes place simultaneously with the changes in the economy- Coincident indicators change with the cycle.(3) Lagging indicators- These activities confirm that economic activities have taken place.- In other words, it confirms the state of the economy.- Lagging indicators change after the cycle turned.

Reasons(Causes) for business cycles:(1) Exogenous reasons (Monetarist theory) - Factors outside the market that influences economic activities- Markets are inherently stable- Market forces regulate the economy automatically (invisible hand)- Weather conditions: droughts and floods affect agricultural production and therefore the total level of

economic activity- Money supply: attempts by government to influence the supply of money (monetary and fiscal policies) disturb

the market mechanism- Inappropriate government policies causes business cycles- Structural changes like machinery replacing manual labour causes business cycles- Shocks unexpected events that affects the economy, e.g. 9/11 events in the USA, sudden oil price adjustments

(2) Endogenous reasons (Keynesian theory or interventionist theory)- Factors within the market influences economic activities- Markets are inherently unstable- Continuous fluctuation of demand and supply- Government intervention is necessary to influence the market- Links between savings and investment, taxation and government expenditure are indirect- If people save or invest, less consumption will take place, thus influencing demand and supply- If taxes increase, government have more to spend, thus influencing demand and supply- When the economy is in a downswing, expansionary monetary policy is applied (lower interest rate and

increased money supply) and expansionary fiscal policy (decrease taxes and reduce government spending)- When the economy is booming, contractionary monetary policy (increased interest rates and decrease money

supply) and contractionary fiscal policy (increase taxes and decrease government spending).

THE EFFECTS OF BUSINESS CYCLES• Changes in aggregate supply and aggregate demand- When the economy contracts (economic activities become less), real GDP, income and production will fall, this

will cause aggregate demand to fall.- When the economy expands (economic activities increase), real GDP, income and production will increase, this

will cause demand to increase• Changes in economic growth- Economic growth is measured in terms of real GDP.- Increased real GDP indicates an upswing or expansionary phase.- Decreased real GDP indicates a downswing or contractionary phase.- If injections are larger than leakages, an upswing will occur.- If leakages are larger than injections, a downswing will occur.• Changes in employment rate - An increased employment rate is generally noticed during an upswing.- A decrease in employment levels generally noticed during a downswing.• Changes in price levels- Prices tend to rise towards the end of the expansionary phase (boom).- Demand is higher than supply, producers cannot keep up with increased demand.• Changes in the rate of exchange- During an expansion, the current account of the balance of payments becomes smaller.- This happens because of the higher demand for imports, more money flowing out of the country.

- This put pressure on the country’s foreign exchange reserves.• Effects on people who are economically vulnerable- Cyclical tendencies cause hardship for many people.- When economic activities decline (downswing) the lives of disabled, children, women, poor people, rural

people and pensioners are affected negatively.• Standard of living- During a downswing the living standards of people decrease.- During an upswing, the living standards of people generally increase.

Written Assessment Assessment Words: List , Identify , Briefly explain, Define, discuss in detail, illustrate, analyse, examine, What.List write an itemised series of concise statements / wordsIdentify give the essential characteristics of ; to nameDiscuss examine by means of argument, presenting both sides and reaching a conclusionDefine give the concise and clear meaningDistinguish Differentiate between or tell apartAnalyse separate, examine and interpret criticallyExamine to look at closely or carefully and in detail in order to discover somethingWhat Contextualise the question like: What benefits…, What negative impact…; What advice?...

ACTIVITY 4 - Writing

1. Give ONE term for each of the following descriptions: (11)1.1 Increase in economic activities and an upward movement along the business cycle1.2 Decrease in economic activities and a downward movement along the business cycle1.3 Slowdown in the economic activities over time1.4 Severe slowdown of economic activities, the economic growth get close to zero1.5 An indication that an increase in economic activities has started1.6 The economy has recovered and is accelerating in terms growth1.7 Latter part of the prosperity phase. Economic activities are at the extreme1.8 A line indicating the general direction of economic activity over the long term1.9 It is an indicator that shows or suggests how an economy is likely to behave1.10 Forces inside the market causing fluctuating economic activities1.11 Forces outside that markets causing fluctuating economic activities

2. Briefly explain the measuring of business cycles. (4)

3. Explain the economic indicators. (9)

4. Examine the reasons for fluctuations in the business cycle. (10)

ACTIVITY 5 - Writing

5. Analyse the exogenous explanation as reason for economic fluctuations. (Monetarists) (8)

6. Analyse the endogenous explanation as reason for economic fluctuations. (Keynesian) (8)

7. Distinguish between exogenous approaches and endogenous approaches to business cycles. (8)

8. Study the information below and answer the question from the illustration. Identify each area / point on the illustration next to the question number.

8.1 Phase labelled A8.2 B-C8.3 C-D8.4 D-E8.5 E-F8.6 F-H8.7 Period B/ F8.8 Period D/H (8)

8.9 What is the above illustration called? (1)

8.10 Briefly describe the term business cycle. (2)

8.11 List THREE examples of economic indicators. (3)

8.12 What does the shape of the business cycle tell us about the economy of the country? (2)

8.13 What is the implication if the trough is very close to the trend line? Motivate your answer(4)

8.14 Why will luxury products be more negatively affected during a recession? (8)

ACTIVITY 6 - Writing

9. Essay Topic

9.

Analyse the different stages of the business cycle. (26)

Draw a fully labelled diagram of a typical business cycle to support your analysis. (10)

SOLUTIONS TO ACTIVITIES: Listening and Marking (teachers must do corrections with the learners the

day after the activity was completed) Or display answers on the Smart Board for learners to mark

1 Give one term for each of the following descriptions:

1.1 Upswing/expansion phase 1.2 Downswing / Contraction 1.3 Recession 1.4 Depression 1.5 Recovery 1.6 Prosperity 1.7 Boom 1.8 Trend Line 1.9 Leading Indicator 1.10 Endogenous 1.11 Exogenous

2. Briefly explain the measuring of business cycles (4)Business Cycles tell us how well the economy is doing. The signals (indicators) in the economy

tell us how well the economy is doing. When the economy is growing people tend to spend more on luxury goods like cars, new companies registering, etc. The opposite is also true, when the Economy is shrinking, the will be less businesses registering; less sales and consequently less employment opportunities.

3. Explain the economic indicators. (9)

Economic indicators measure changes and movement in the levels of economic activity.There are three types of indicators namely:Leading indicators: Economic indicator which shows changes before changes in the general level of economic activity Lagging Indicator: Economic indicator which shows changes after changes in the general level of economic activity Coincident indicators: economic indicators which shows changes at the same time as changes

in the level of economic activity

4. Examine the reasons for fluctuations in the business cycle. (10)There are Exogenous reasons; these are reasons originating outside the economy. Weather conditions: droughts and floods affect agricultural production and therefore the total level of economic activity

- Money supply: attempts by government to influence the supply of money (monetary and fiscal policies) disturb the market mechanism

- Inappropriate government policies causes business cycles - Structural changes like machinery replacing manual labour causes business cycles - Shocks unexpected events that affects the economy, e.g. 9/11 events in the USA, sudden

oil price adjustments (Max 5)

There are Endogenous Factors within the market influences economic activities- Markets are inherently unstable , continuous fluctuation of demand and supply- Government intervention is necessary to influence the market - Links between savings and investment, taxation and government expenditure are indirect - If people save or invest, less consumption will take place, thus influencing demand and supply - If taxes increase, government have more to spend, thus influencing demand and supply- When the economy is in a downswing, expansionary monetary policy is applied (lower interest rate and

increased money supply) and expansionary fiscal policy (decrease taxes and reduce government spending)- When the economy is booming, contractionary monetary policy (increased interest rates and decrease money

supply) and contractionary fiscal policy (increase taxes and decrease government spending).(Max 5)

5. Analyse the exogenous explanation as reason for economic fluctuations. (Monetarists) (8)

There are Exogenous reasons; these are reasons originating outside the economy. Weather conditions: droughts and floods affect agricultural production and therefore the total level of economic activity, such as the droughts currently affecting the Western Cape

- Money supply: attempts by government to influence the supply of money (monetary and fiscal policies) disturb the market mechanism. The interest rate decreased recently, to assist in stimulating economic activity through a decrease in the repo rate by 25 basis points.

- Inappropriate government policies causes business cycles, like the creation of uncertainty in the business environment through inappropriate policies. - Structural changes like machinery replacing manual labour causes business cycles - Shocks unexpected events that affects the economy, e.g. 9/11 events in the USA, sudden oil price adjustments, - The current political instability in SA, and the midnight cabinet reshuffle created some uncertainty, and subsequent downgrades to the South African economy. ANY OTHER RELEVANT EXOGENOUS EVENTS THAT ARE AFFECTING THE ECONOMY CAN BE DISCUSSED IN CONTEXT , WITH APPROPRIATE EXAMPLES (4X 2 = 8)

6. Analyse the endogenous explanation as reason for economic fluctuations. (Keynesian)- These are the reasons originating from within the economic system itself. - Government intervention is necessary to influence the market, as the level of economic activity

increases, total spending in the in the economy will increase too. - This will lead to a demand driven business cycle. This increase in spending will lead to an increase in

imports, which may result in the exchange rate losing its value. - Links between savings and investment, taxation and government expenditure are indirect - If people save or invest, less consumption will take place, thus influencing demand and supply- If taxes increase, government have more to spend, thus influencing demand and supply- When the economy is in a downswing, expansionary monetary policy is applied (lower interest rate and

increased money supply) and expansionary fiscal policy (decrease taxes and reduce government spending)- When the economy is booming, contractionary monetary policy (increased interest rates and decrease money

supply) and contractionary fiscal policy (increase taxes and decrease government spending).- Our perceptions also play a role in influencing the direction of the business cycle.

Positive expectations- households and businesses tend to spend moreWith negative expectations, households and businesses tend to spend less; this can cause contractions

in the economy, putting the business cycle in the recessionary phaseANY OTHER RELEVANT ENDOGENOUS EVENTS THAT ARE AFFECTING THE ECONOMY CAN BE DISCUSSED IN CONTEXT WITH APPROPRIATE EXPLAINATIONS (4 X 2 =8)

7. Distinguish between exogenous approaches and endogenous approaches to business cycles. (8)

Endogenous approach:

• This follows the belief that economic growth is primarily the result of endogenous and not external forces • This is often called the Keynesian view. This approach holds the view that markets are inherently unstable and therefore government intervention may be required • The price mechanism fails to co-ordinate demand and supply in markets and this gives rise to upswings and downswings • Prices are not flexible enough (e.g. wages) • A business cycle is an inherent feature of a market economy • Indirect links or mismatches between demand and supply are normal features of the economy

Exogenous• Refer to those independent factors that can influence business cycles and originate outside the economy • Some economists believe that business cycles are caused by exogenous factors such as those described below • The monetarists believe markets are inherently stable and disequilibrium is caused by incorrect use of policies, e.g. monetary policy The following are examples:• Weather conditions and shocks cause upswings and downswings • Governments should not intervene in the market • Sunspot theory based on the belief that increased solar radiation causes changes in weather conditions • Technological changes

8.1 Phase labelled A - Prosperity 8.2 B-C - Recession 8.3 C-D - Depression 8.4 D-E - Recovery 8.5 E-F - Prosperity 8.6 F-H - Downswing/ Contraction 8.7 Point B/ F - Complete Cycle 8.8 Point D/H - Complete Cycle (8)

8.9 What is the above illustration called? (1)Business Cycle

8.10 Briefly describe the term business cycle. (2)Business Cycles can be described as continuous periods of increasing and decreasing of economic activity of a

country, having repetitive patterns of expansion and contraction in production, income and consumption.

8.11 List THREE examples of economic indicators. (3)

Leading Indicators Lagging Indicators Coincident Indicator

8.12 What does the shape of the business cycle tell us about the economy of the country? (2) A complete cycle is measured from Peak to Peak, or trough to trough.Even though there are fluctuations in the economy, the expectation is that the trend should indicate an upward

movement, to signify overall increase in the production capacity of the economy.

8.13 What is the implication if the trough is very close to the trend line? Motivate your answer(4)

This would indicate a flat business cycle, with the trend (average ) being close to the trough So there would be very little growth in the GDP The oscillations with high amplitude will indicate higher growth and lower troughs. But smaller amplitudes show less growth; consequently, closer to the trough (downward turning point)

8.14 Why will luxury products be more negatively affected during a recession? (8)During a recessionary phase there is more unemployment and less production. People have less disposable income to spend, and will rather spend the little they have on necessities . Perfume is considered a luxury and fewer people will spend on it, therefore less of the product will be sold, and also less of it produced. Therefor all luxury products will attract less spending during this phase of the business cycle.

Essay Topic: Business Cycles –

STRUCTURE OF ESSAY MARK ALLOCATION

IntroductionThe introduction is a lower order response: A good starting point would be to define a concept that appears in the question Do not include any part of the question in your introduction

Max. 2

Do not repeat any part of the introduction in the body Avoid saying in the introduction what you are going to discuss in the bodyBody: Main part: Discuss in detail / In depth discussion / Examine / Critically discuss / Analyse /

Compare / Evaluate / Distinguish / Explain / Assess / Debate.

Additional part: Give own opinion / Critically discuss / Evaluate / Critically evaluate / Draw a graph and explain / Use the graph given and explain / Complete the given graph / Calculate / Deduce / Compare / Explain / Distinguish / Interpret / Briefly debate / How / Suggest / Use the information and argue

Max. 26

Max. 10

ConclusionAny relevant higher order conclusion that should include: A brief summary of what has been discussed / analysed without repeating facts already mentioned

in the body An opinion or valued judgement on the facts discussed Additional support information to strengthen the discussion / analysis A contradictory viewpoint with motivation, if required Recommendations

Max. 2

TOTAL 40

9. Analyse the different stages of the Business Cyclw. (26)Draw a fully labelled diagram of a typical business cycle to support your analysis. (10)

Introduction: The concept referring to the ups and downs in economic activity can be defined as business cycle. / Business Cycles can be described as continuous periods of increasing and decreasing of economic activity of a country, having repetitive patterns of expansion and contraction. ANY Other relevant definition of Business Cycles

Main Part:Business Cycles are divided into two broad phases, these are the upswing (expansion) and downswing (contraction) phases.

UPSWING/EXPANSION PHASE Increase in economic activities and an upward movement along the business cycle.

• Recovery phase- An indication that an increase in economic activities has started.

• Prosperity phase- The economy has recovered and is accelerating in terms of growth. • Peak - Economic activities are at its highest point. - It signals the end of the expansion phase. From this point the contraction phase starts.

DOWNSWING/CONTRACTION - Decrease in economic activities and a downward movement along the business cycle.

• Recession - Slowdown in the economic activities over time. • Depression - Severe slowdown of economic activities, the economic growth gets close to zero.

• Trough - Economic activities are at its lowest point. It signals the end of the contraction phase.

It is a turning point indicating the start of the expansion phase. Headings – Maximum of 8 MarksDiscussion- Maximum of 18 Marks

Total 26

Conclusion: Accurate prediction is not possible in Economics, the best the economists can do is to try and forecast what might happen. That is why business cycles are useful in predicting the possible direction of the economy Business cycles will continue to have an effect on the economic well-being of South Africa in future. Although we may understand the causes of business cycles and how the economy may respond to certain policies, accurate prediction of business cycles is beyond us. The current coronavirus is already affect the business cycle negatively, as SA is in a technical recession, and the situation is causing havoc on all markets, and the economies of emerging countries like South Africa.

Use the above Essay and draw up a mind map for yourself, to help you remember the headings and subheadings

BOOM

Class Test – Concepts ACTIVITY 7

Class Test : Learners are given the definitions and should write down the concept only (as in question 1.3 of the NSC)

Give the term for the following descriptions. Write the answer next to the correct number: [E.G 1. Circular Flow]1. These can be described as consecutive periods of increasing and decreasing of economic activity of a country.2. Increase in economic activities and an upward movement along the business cycle.3. Decrease in economic activities and a downward movement along the business cycle.4. Slowdown in the economic activities over time.5. Severe slowdown of economic activities, the economic growth gets close to zero.6. An indication that an increase in economic activities has started.7. The economy has recovered and is accelerating in terms of growth.8. Economic activities are at its highest point. It signals the end of the expansion phase. From this point the

contraction phase starts.9. Economic activities are at its lowest point. It signals the end of the contraction phase. It is a turning point

indicating the start of the expansion phase.10. Latter part of the prosperity phase. Economic activities are at the extreme.11. A line indicating the general direction of economic activity over the long term.12. The distance between the trend line and the peak and the trend line trough. 13. It is an indicator that shows or suggests how an economy is likely to behave.14. These activities confirm that economic activities have taken place. In other words, it confirms the state of the

economy. Lagging indicators change after the cycle has turned.15. These indicators reach a peak before economic activities peaks or reach a trough before economic activities

reaches a trough.16. These activities take place simultaneously with the changes in the economy. Coincident indicators change

with the cycle.17. Forces inside the market causing fluctuating economic activities.18. Forces outside the markets causing fluctuating economic activities.19. Stipulate that endogenous reasons cause economic fluctuations. Markets are inherently unstable.

Government intervention is necessary.20. Stipulate that exogenous reasons cause economic fluctuations. Inappropriate government policies, weather

and structural changes in the economy cause business cycles.

ANSWERS – SOLUTIONS1. Business cycle 2. Upswing/expansion phase 3. Downswing/contraction 4. Recession 5. Depression 6. Recovery phase 7. Prosperity phase 8. Peak 9. Trough 10. Boom 11. Trend line 12. Amplitude 13. Economic indicator 14. Lagging indicator 15. Leading indicator 16. Coincident indicator 17. Endogenous factors 18. Exogenous factors 19. Keynesian view 20. Interventionist view/ Monetarist view