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The Business Cycle - CHC2D

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A brief introduction about the Business Cycle.

A brief introduction about the Business Cycle.

Published in: Business, Economy & Finance

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  • 1. The Business Cycle By: Anthony H . & Max Z. Teacher: Ms. Hale
  • 2. What is a Business Cycle?
    • A business cycle is fluctuation, or changes, in which economies go through from time to time
    • - These changes are divided into 4 segments; prosperity, recession, trough/depression and recovery
    • - Economic statistics have proven that all economies experience these stages, and one cycle eventually creates another
    • - The Great Depression was part of a business cycle; however, its length and unprecedented effects make it very distinct than others
    Figure 1.1 New York Stock Exchange Figure 1.2. Bankruptcy: Result from economic recessions
  • 3. Four steps to the Business Cycle
    • The Four Steps in the Business Cycle are...
    • Prosperity - part of cycle when all rates are stable at a high point (high employment, profits)
    • Recession - point of cycle when rates are changing or fluctuating for the worse
    • Depression - when all rates are stable at a low point
    • Recovery - point of cycle when rates are changing or fluctuating for the better
    Figure 2.1 The Business Cycle
  • 4. Who is affected by this? - Often, in a business cycle, multiple countries which share major relations (in terms of trade, assistance) with a superpower (such as the United States, China) often are hardest hit - As these countries experience the 4 phases, other countries follow suit - During the 1930s, as American stocks plummeted, our stocks dropped immediately; when their employment rose, our employment rose as well Figure 3.1 Good days in America bring good days at home (American flag, 1920s stock market – Canadian flag, Ford Model A dealer)
  • 5. Where does it occur? - The business cycle occurs within the economies of every nation - Depending on a country’s economic strength, their cycle may influence or be influenced by Figure 4.1. Influences the United States has upon other countries (Clockwise: U.K., Africa, India, Japan)
  • 6. When does it happen? - Even though this is referred to as a “cycle”, there is no time boundaries for each of the 4 stages - In other words, the Business Cycle is more “reoccurring” rather than “periodic” e.g. Over the past few decades, the recession stage has occurred in 1974, ’87, ’91, 2001 and ’08, showing no pattern within its intervals Figure 5.1. Example of recessions or downturns
  • 7. Why are there business cycles? - Business cycles occur because of uneven growth within different parts of an economy - When those sectors create increases or downturns, they eventually spread to other parts of the economies and create each stage - In 1929, the rapid growth and decline of the American financial markets created changes within the amount of money which people had - That led to effects within the sectors of manufacturing, retail, farming, etc. Figure 6.1. Results from the Stock Market Crash of 1929 (Left: Panic on Wall Street) (Right: Bennett Buggies and welfare lineups)
  • 8. How did the Business Cycle impact Canada? - Due to the various stages of the cycle, Canada’s economy became very unstable between 1920 to 1940 - During the Prosperity period (1920-October 1929), the American GDP rose from $570 billion to $820 billion at its peak; Canada, undoubtedly, experienced similar changes but at a smaller scale - When the Recession period hit (1929-1933), unemployment rates dramatically increased, profits from corporations plunged from $396 million into $98 million in debt and the average yearly income in Ontario dropped from $549 to $310 Figure 7.1. Major inventions and industrialization created many employment opportunities (Left to right: Penicillin, airplanes and highway construction)
  • 9. - At the peak of the Great Depression (1929-1939), nearly 30% of working Canadians were unemployed, creating massive demand at soup kitchens and large populations within relief camps in the West - Sadly, our Recovery period (1933-1938, 1939 and after) came only at the hands of World War II when unemployed men entered the military, government spending on equipment increased and many war industries started again to satisfy the increasing demand overseas Figure 8.1. Men eating their meals at soup kitchens Figure 8.2. Temporary shelter at relief camps
  • 10. Prosperity
    • After WW1, the Canadian economy had skyrocketed
    • The economy took advantage of Canada’s unlimited supply of forests, minerals, water, and fertile land for agriculture.
    Prosperous Economy People earned more money More was spent within stores Prices rose as demand increased More production was required Profits increased Workers demand higher wages More job opportunities Decrease in unemployment rates
  • 11. Recession Overproduction, lower product demand and bad weather drop prices Lower sales Lower profits Production slowed Businesses cannot repay loans and went bankrupt Unemployment rises Depression…
    • Black Tuesday (October 29 th , 1929) marked the beginning of the end for the Canadian economy, which had been on a constant soar for 7 straight years
    • More than 16 million in shares were sold in the New York Stock Exchange, leaving thousands of investors and companies in ruins
    • Once wealthy men were now unemployed beggars
    • Immediately, our economy sunk as 40% of all our exports are bought by the United States
  • 12. Depression
    • Following the Stock Market Crash and recession, depression occurred within Canada
    • Companies shut down, workers laid off, very low demand with little money to spend from all
    • In addition, a drought hit the Prairie provinces in 1929, ’31, 33-37 creating devastating effects for farmers
    Figure 9.1. Drought conditions on the Prairies during the Dirty Thirties
  • 13. Depression Cont’d…
    • When people had no money, mortgages and rent could not be paid
    • Many lost their homes
    • Strong tensions formed between citizens and the government
    Figure 10.2. Unemployed Parade in Toronto in the Great Depression Figure 10.1. Four men crowd the same bed to save space
  • 14. Recovery
    • Recovery happens when demand for products/services increase, leading to increases in production and employment
    • Opportunities as soldiers in WWII and the need for war materials brought money back into peoples’ pockets
    • It took nearly 10 years revive the economy
    Figure 11.1. Canadian battalions in Europe during WWII Figure 11.2. Women working in war industries
  • 15. Historical Importance
    • The Business Cycle during the 20s and 30s is important to many Canadian measures and benefits today
    • Because of the depression stage, it pushed for Prime Minister R.B. Bennett to introduce his New Deal plan, which included unemployment insurance, minimum wages and farmer grants
    • Nearly all of those programs still exist today
    Figure 12.1. Canadian Prime Minister Richard B. Bennett He introduced the New Deal to Canadians in 1935
  • 16. Key Points about the Business Cycle
    • Patterns of change within the economy
    • - 4 major stages: Prosperity (good times), Recession (worsening times), Depression (bad times) and Recovery (better times)
    • - Business cycles occur everywhere and anytime
    • - The Roaring 20s and Dirty 30s were just like any cycle, but longer and stronger effects
    • - Not all cycles reach depression; some cycles hit a “trough” and recover
  • 17. Bibliography
    • Books:
    • Cruxton, J.B., & Wilson, W.D. (2000). Spotlight Canada . Don Mills, ON: Oxford University Press.
    • Downing, D. (2001). The Great Depression. New York: Heinemann Library
    • Quinlan, D., Baldwin D., Mahoney, R., & Reed K. (2008). The Canadian Challenge. ON: Oxford University Press
    • Unstead, R J. (1973). The Twenties. New York: Macdonald and Company Publishers
    • Websites:
    • McQueen, D. Bank of Canada. Retrieved October 16, 2009, from
    • < http://www.bankofcanada.ca/en/publication/mcqueen.html>
    • Paesani, Judith B., and William N. Kinnard, Jr. &quot;Business Cycles.&quot; Encyclopedia Americana. 2009. Grolier Online. 17 Oct. 2009 <http://ea.grolier.com/article?id=0068200-00>.
    • &quot; stock market crash of 1929 .&quot; Encyclopædia Britannica . 2009. Encyclopædia Britannica Online. 17 Oct. 2009
    • Thorkelson, H. John. &quot;Great Depression.&quot; Encyclopedia Americana. 2009. Grolier Online. 17 Oct. 2009 <http://ea.grolier.com/article?id=0183650-00>.
    • http://www.canadianeconomy.gc.ca/english/economy/1929stock.html
    • http://www.yesnet.yk.ca/schools/projects/canadianhistory/depression/depression.html#EFFECTS
  • 18.
    • Picture Credits:
    • Figure 1.1: http://i.ehow.com/images/GlobalPhoto/Articles/2172865/nyse-main_Full.jpg
    • Figure 1.2: http://www.doobybrain.com/wp-content/uploads/2009/03/closed-stores.jpg
    • Figure 2.1: The Canadian Challenge: Oxford Canada (P.83)
    • Figure 3.1: http://techbuddha.files.wordpress.com/2009/05/american-flag.jpg
    • http:// www.britannica.com/EBchecked/topic/566754/stock-market-crash-of- 1929 http://trendliest.files.wordpress.com/2009/01/news_canadian-flag-640.jpg
    • http://roaring-twenties.com/280ab0d0.png
    • Figure 4.1: http://static.howstuffworks.com/gif/google-earth-globe.jpg
    • http://img.alibaba.com/images/cms/upload/news1/country_profiles/jp.gif
    • http://wwp.greenwichmeantime.com/time-zone/asia/india/images/map-of- india.gif
    • http://www.4hotels.co.uk/uk/images/great-britain.gif
    • http://www.nsrc.org/AFRICA/africa.gif
  • 19.
    • Figure 5.1: http://www.efalken.com/banking/images/et2deftimserchrt.gif
    • Figure 6.1: http://greatdepressionhistory.com/wp-content/uploads/2008/11/stock-market-crash-1929.jpg
    • http://vantech.vsb.bc.ca/ss/pm/ss11/online/ss11/index.htm
    • http://graphics8.nytimes.com/images/2007/08/26/books/leon450.jpg
    • Figure 7.1: http://www.tqnyc.org/2005/NYC051907//Penicillin.jpg http://www.deldot.gov/information/media_gallery/2002/85th/images/gtwn_lewes_hwy_1920s.jpg
    • http://www.airforce.forces.gc.ca/v2/equip/resrc/images/hst/l-g/nieuporta29.jpg
    • Figure 8.1: http://z.about.com/d/canadaonline/1/0/5/C/gdsoupkitchen.jpg
    • Figure 8.2: http://z.about.com/d/canadaonline/1/0/8/C/gdtemporaryhousing.jpg
    • Figure 9.1: http://z.about.com/d/canadaonline/1/0/6/C/gddrought.jpg
    • Figure 10.1: http://z.about.com/d/canadaonline/1/0/F/C/gdcrowdedroom.jpg
    • Figure 10.2: Toronto Star / Library and Archives Canada / C-029397
    • Figure 11.1: http://berkeley.edu/news/berkeleyan/2009/02/images/wwII- soldiers.jpg
    • Figure 11.2: http://www3.nfb.ca/fm455w/Collections/Photos/WWII/Rubrique3_Le_front_interieur/Section1_Les_femmes_et_la_guerre/3-1-4_e000760702.jpg
    • Figure 12.1: http://z.about.com/d/canadaonline/1/0/T/2/rbbennett.jpg