Business Cycles

Peaks and Troughs…

Expansion and Recession, the ups and downs of economic activity.

Expansion and RecessionExpansion and Recession

• ExpansionExpansion - A period of investment, production and - A period of investment, production and increases in sales and business activity.increases in sales and business activity.

• ““PeakPeak” – the point where expansion stops, and overall ” – the point where expansion stops, and overall business activity begins to slow.business activity begins to slow.

• RecessionRecession – a period of decline in economic activity – a period of decline in economic activity marked by a reduction in real GDP for 6 months – (2 1/4s).marked by a reduction in real GDP for 6 months – (2 1/4s).

• ““TroughTrough” - The point where real GDP stops going down.” - The point where real GDP stops going down.

““Fueling” ExpansionFueling” Expansion

• How could the following factors cause US businesses to expand?

Foreign Investment

The Government

Competition

Consumers

World Events

Graphs of Peaks and Troughs

Go to Page 311

in the textbook, to investigate the

nature of business activity in the US.

Predicting Business CyclesPredicting Business Cycles

Index of Leading Economic Indicators

Average workweek (manufacturing)

Initial unemployment claims

     New orders for consumer goods

     Vendor performance (Purchasing Managers)

     Plant and equipment orders

     Building permits

     Change in unfilled durable orders

     Stock prices (S&P 500)

     Real M2 (Money , Chk. & Sav., some CDs, $ funds )

     Index of consumer expectations (Confidence)

Homework – Due 5/2Homework – Due 5/2Posted on the Web Site Under the Calendar for 4/30

Chapter 15 Review – Page 390

Applying Economic Concepts

Go to: www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

Scroll down to “Leading Indicators”, and read the report, then, answer Question # 1 above.