See Learning Goal 5: Discuss the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle.Yes, it is true that a recession is two or more consecutive quarters of contracting gross domestic product, but students will be interested to know that for a recession to be officially labeled a recession it must be declared by the National Bureau of Economic Research. Their website, www.nber.org, provides numerous resources to further explain this part of the business cycle.
Business Cycle presentation
Business Cycles Presentation
This is the collection
on the Business
Cycles from Slide
Compiled by Thabani
• Business Cycles -- Periodic rises and falls that occur in
economies over time.
• Four Phases of Long-Term Business Cycles:
1. Economic Boom
2. Recession – Two or more consecutive quarters of
decline in the GDP.
3. Depression – A severe recession.
4. Recovery – When the economy stabilizes and starts to
grow. This leads to an Economic Boom.
Features of Business Cycles
Gradual increase Rapid increase
• The business cycle is the periodic but irregular up-and-down
movements in economic activity, measured by fluctuations in real
GDP and other macroeconomic variables
• A business cycle is identified as a sequence of four phases:
– Contraction (A slowdown in the pace of economic
– Trough (The lower turning point of a business
cycle, where a contraction turns into an expansion)
– Expansion (A speedup in the pace of economic activity)
– Peak (The upper turning of a business cycle)
What does a model of the
business cycle look like?
The Business Cycle: diagram
Business Cycle : Diagram
WHAT ARE THE PHASES OF THE BUSINESS
CYCLE AND THE CHARACTERISTICS OF
PHASES OF THE BUSINESS CYCLE
• Expansion/Growth: During this phase of
the business cycle, consumer and business
• Peak: After a period of growth, an
economy will reach a peak, where business
is producing at or near full capacity, and the
economy is at or near full employment.
Indicators of Business Cycles
There are variables other than real GDP that influence
the business cycle. They are classified into three:
(1) Leading Indicators: generally change before real
Can be used to forecast future output.
(2) Coincident Indicators: tend to change at the same
time as real output changes
eg: as real output increases employment and sales
Ref: MB p.136
Recession: This is a phase
when real GDP begins to
decline. Consumers and
business reduce their
rises, investment declines, and
pessimism about the economy
is likely to grow.
Trough/Depression: This is
the lowest point of the
business cycle. Factories will
be operating below capacity,
allowing unemployment to
reach high levels
Sources of Business cycle
• AGGREGATE DEMAND
• AGGREGATE SUPPLY
The degree to which real GDP declines or
increases depends on the amount by which AD
and AS curve shifts.
Business and a Boom
• A boom occurs when national output is rising
at a rate faster than the trend rate of growth
• It is characterised by HIGH consumer
spending, high business confidence,
investments and profits
• There is a lot more output.
CAUSES OF BUSINESS CYCLES
1. Inventions and innovation: Major changes in
technology can influence the business cycle.
Usually technological changes move the
economy in a positive direction, but this is not
2. Wars and political events: The impact of such
events on the economy are very fact specific- in
other words, difficult to generalize about.
A THOUGHT ON THE BUSINESS CYCLE
The business cycle tends to be selfsustaining. In other words, when in a
period of growth, the economy will
continue to grow (jobs leading to jobs)
until some event (internal or external)
A Good Cycle
A Bad Cycle
GOVERNMENT AND THE BUSINESS CYCLE
• In order to prevent the economy from
running too hot (inflation) or too cold
government often becomes involved in
efforts to try and stabilize the
• The government has two major tools to try
and stabilize the economy and achieve its
goals: fiscal policy and monetary policy.
Fiscal policy is the taxing and spending
decisions that are made by the President
• Fiscal policy actions of the government
fall into two general categories:
1. Raise or Lower Taxes
2. Increase or Decrease Government
During a Recession
The Government can
• Lower taxes and/or
• Increase spending
These actions boost the economy by putting
more money in the hands of people so they can
This is called Expansionary Fiscal Policy
Growth Phase – Boom Phase
Launched in India in 1988
Waves of optimism.
Highest point of Expansion.
profits, investment, sales, employment etc.
RETAIL MARKET SHARE OF BEVERAGE PRODUCTS
Outcome- Decline in
profits, sales etc.
Turning point from depression into
A result of New Innovation.
Aggarwal. A, Goyal. R, Jhamb. S, Gaurav. S, Karwa. A, & Rathi. R. (2012). Recesion in Japan& United
Japan+%26+United+States.03 (March 2014)
Bobby. A, Sharma. A, Vineetha. K, Raghvandra. Y, Rohit. P& Vaibhav. J. (2010). Business Cycles:
http://www.slideshare.net/SameerAlam/mrktng-b-group5-business-cycle?qid=dbcecc0b-eb11-4020b455-84c8c7d42ac9&v=default&b=&from_search=34. (05 March 2014)
Akshbapna. D. (2014): Business cycles: http://www.slideshare.net/dakshbapna/business-cycle31444513?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=qf1&b=&from_search=2. 06 March 2014.
Becker. B, (2013). Corporate credit and Business cycle: http://www.slideshare.net/GlobalUtmaning/bobecker?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=qf1&b=&from_search=8. 05 March 2014.
Singla. H, (2012). Business Cycle: http://www.slideshare.net/harshulsingla/businesscycle1?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=default&b=&from_search=21. 05 March