SlideShare a Scribd company logo
1 of 22
Business Cycle
Is the economy getting better or
worse?
Micro vs. Macro
• Microeconomics: The study of personal, or
small finances.
– Individuals, families or businesses
• Macroeconomics: The study of economic
systems on a large scale
– National or Global economies
Gross Domestic Product
• Def. The total value, in dollars, of all final
goods and services produced within the
nation each year
• Abbreviated as the GDP
What does the GDP tell us?
• If the GDP is larger than last year the
economy is expanding (getting bigger)
• If the GDP is smaller, the economy is
shrinking (getting smaller)
Business Cycle
• The Business Cycle allows people to
understand the direction the economy
(GDP) is going (growing or shrinking) and
plan accordingly.
• The economy follows the Business Cycle
regularly.
Phases of the Business Cycle
Expansion (Growing)
Peak (Top)
Contraction (Shrinking)
Trough (Bottom)
Business Cycle
Peak
Trough
Peak
Expansion
• During a period of expansion:
– Wages increase
– Low unemployment
– People are optimistic and spending money
– High demand for goods
– Businesses start
– Easy to get a bank loan
– Businesses make profits and stock prices
increase
Peak
• When the economic cycle peaks:
– The economy stops growing (reached the top)
– GDP reaches maximum
– Businesses can’t produce any more or hire
more people
– Cycle begins to contract
Contraction
• During a period of contraction:
– Businesses cut back production and layoff
people
– Unemployment increases
– Number of jobs decline
– People are pessimistic (negative) and stop
spending money
– Banks stop lending money
Trough
• When the economic cycle reaches a
trough:
– Economy “bottoms-out” (reaches lowest point)
– High unemployment and low spending
– Stock prices drop
But, when we hit bottom, no where to go but
up!
UNLESS….
Recession/Depression
• A prolonged contraction is called a
recession (contraction for over 6 months)
• A recession of more than one year is
called a depression
What keeps the Business Cycle
Going?
• 4 variables cause changes in the
Business Cycle:
1. Business Investment
When the economy is expanding, sales and
profit keep rising, so companies invest in
new plants and equipment, creating new
jobs and more expansion. In contraction, the
opposite is true
What Keeps the Business Cycle
Going?
2. Interest Rates and Credit
Low interest rates, companies make new
investments, adding jobs. When interest
rates climb, investment dries up and less job
growth
3. Consumer Expectations
Forecasts of an expanding economy fuels more
spending, while fear of a recession
decreases consumer spending
What keeps the Business Cycle
Going?
4. External Shocks
External Shocks, such as disruptions of the oil
supply, wars, or natural disasters greatly
influence the output of the economy
Ex. 1992-2000 was the longest period of
expansion in U.S. history. Early in 2001,
signs of contraction appeared, though the
Bush administration denied it. The Sept. 11th
2001 terrorist attacks quickly caused the
business cycle to shift into a contraction.
Who Cares?????
• Why should you care about the business
cycle and economy?
• Lots of reasons!
“Don’t quit that job!”
• If the economy is going into a contraction,
jobs will become more scarce. If you quit,
you may not find another job!
• But, if the economy is in a period of
expansion, jobs are readily available. It
may be a good time to switch careers.
“Should I make a big purchase?”
• Only if you know that you won’t lose your
job in a contraction. So, buy your house
during an expansion.
HOWEVER,
• When the economy starts to slow down
(contraction), interest rates will decrease.
Wait to buy a house until the rates drop to
a low point, if you are sure you won’t lose
your job.
Quick Review!
• What phase of the business cycle do
wages go up?
• Expansion
• What phase of the business cycle do
wages go down?
• Contraction
Review cont.
• When are wages at their highest?
• Peak
• When are wages at their lowest?
• Trough
More Review
• When will borrowing decrease?
• Contraction
• When will borrowing increase?
• Expansion
• When will borrowing be at it’s lowest?
• Trough
Even More Review!
• When will unemployment be at its lowest?
• Peak
• When will business profits be the highest?
• Peak
• When should you look for a new job?
• Expansion

More Related Content

Similar to Business_Cycles.ppt

Business Cycle presentation
Business Cycle presentation Business Cycle presentation
Business Cycle presentation Thabani Mhlongo
 
Phases of business cycle
Phases of business cyclePhases of business cycle
Phases of business cycleanurag singh
 
Phases of businesscycle
Phases of businesscyclePhases of businesscycle
Phases of businesscycleFarhan Atta
 
071_PPT_Business_Environment_Sem-II.pptx
071_PPT_Business_Environment_Sem-II.pptx071_PPT_Business_Environment_Sem-II.pptx
071_PPT_Business_Environment_Sem-II.pptxVarshPatel4
 
Seminar 7th oct 2011 (final)
Seminar 7th oct 2011 (final)Seminar 7th oct 2011 (final)
Seminar 7th oct 2011 (final)fundexpert
 
3.Economic performance-business cycle-I.ppt IN 2013 BU.ppt
3.Economic performance-business cycle-I.ppt IN 2013 BU.ppt3.Economic performance-business cycle-I.ppt IN 2013 BU.ppt
3.Economic performance-business cycle-I.ppt IN 2013 BU.pptJaafar47
 
It's What You Know for Sure that Just Ain't So
It's What You Know for Sure that Just Ain't SoIt's What You Know for Sure that Just Ain't So
It's What You Know for Sure that Just Ain't SoMitch Green
 
Macro Economics_Business Cycles.pptx business development
Macro Economics_Business Cycles.pptx business developmentMacro Economics_Business Cycles.pptx business development
Macro Economics_Business Cycles.pptx business developmentAlka392097
 
Theories of trade cycle
Theories of trade cycle Theories of trade cycle
Theories of trade cycle Ram Kumar
 

Similar to Business_Cycles.ppt (20)

Macro Economics.pptx
Macro Economics.pptxMacro Economics.pptx
Macro Economics.pptx
 
Macro economics
Macro economicsMacro economics
Macro economics
 
Business Cycle presentation
Business Cycle presentation Business Cycle presentation
Business Cycle presentation
 
Phases of business cycle
Phases of business cyclePhases of business cycle
Phases of business cycle
 
Phases of businesscycle
Phases of businesscyclePhases of businesscycle
Phases of businesscycle
 
Phases of business cycle pgp
Phases of business cycle pgpPhases of business cycle pgp
Phases of business cycle pgp
 
Business cycle
Business cycleBusiness cycle
Business cycle
 
071_PPT_Business_Environment_Sem-II.pptx
071_PPT_Business_Environment_Sem-II.pptx071_PPT_Business_Environment_Sem-II.pptx
071_PPT_Business_Environment_Sem-II.pptx
 
phases of economy
phases of economyphases of economy
phases of economy
 
Seminar 7th oct 2011 (final)
Seminar 7th oct 2011 (final)Seminar 7th oct 2011 (final)
Seminar 7th oct 2011 (final)
 
Business cycle
Business cycleBusiness cycle
Business cycle
 
Stock Market Crash 2018 Game Plan
Stock Market Crash 2018 Game PlanStock Market Crash 2018 Game Plan
Stock Market Crash 2018 Game Plan
 
Business Cycles - Jonathan Newman
Business Cycles - Jonathan NewmanBusiness Cycles - Jonathan Newman
Business Cycles - Jonathan Newman
 
Business cycles
Business cyclesBusiness cycles
Business cycles
 
3.Economic performance-business cycle-I.ppt IN 2013 BU.ppt
3.Economic performance-business cycle-I.ppt IN 2013 BU.ppt3.Economic performance-business cycle-I.ppt IN 2013 BU.ppt
3.Economic performance-business cycle-I.ppt IN 2013 BU.ppt
 
CA NOTES ON BUSINESS ECONOMICS
CA NOTES ON BUSINESS ECONOMICSCA NOTES ON BUSINESS ECONOMICS
CA NOTES ON BUSINESS ECONOMICS
 
It's What You Know for Sure that Just Ain't So
It's What You Know for Sure that Just Ain't SoIt's What You Know for Sure that Just Ain't So
It's What You Know for Sure that Just Ain't So
 
Trade cycle
Trade cycleTrade cycle
Trade cycle
 
Macro Economics_Business Cycles.pptx business development
Macro Economics_Business Cycles.pptx business developmentMacro Economics_Business Cycles.pptx business development
Macro Economics_Business Cycles.pptx business development
 
Theories of trade cycle
Theories of trade cycle Theories of trade cycle
Theories of trade cycle
 

More from RichaGoel44

hubbard01_instructorppt02.ppt comparativ
hubbard01_instructorppt02.ppt comparativhubbard01_instructorppt02.ppt comparativ
hubbard01_instructorppt02.ppt comparativRichaGoel44
 
hubbard01_instructorppt01.ppt eco founda
hubbard01_instructorppt01.ppt eco foundahubbard01_instructorppt01.ppt eco founda
hubbard01_instructorppt01.ppt eco foundaRichaGoel44
 
EXIM procedures & documentation for.pptx
EXIM procedures & documentation for.pptxEXIM procedures & documentation for.pptx
EXIM procedures & documentation for.pptxRichaGoel44
 
Business_Cycles working fiscal measures .ppt
Business_Cycles working fiscal measures .pptBusiness_Cycles working fiscal measures .ppt
Business_Cycles working fiscal measures .pptRichaGoel44
 
1. Concept of Business Env bvhjhkjljj.ppt
1. Concept of Business Env bvhjhkjljj.ppt1. Concept of Business Env bvhjhkjljj.ppt
1. Concept of Business Env bvhjhkjljj.pptRichaGoel44
 
Role of Government in organized society; Changing Perspective- government in ...
Role of Government in organized society; Changing Perspective- government in ...Role of Government in organized society; Changing Perspective- government in ...
Role of Government in organized society; Changing Perspective- government in ...RichaGoel44
 
Musgrave theory of comparaitive advantage in public finance
Musgrave theory of comparaitive advantage in public financeMusgrave theory of comparaitive advantage in public finance
Musgrave theory of comparaitive advantage in public financeRichaGoel44
 
Personal Branding Webinar on women leadership and empowerment and education
Personal Branding Webinar on women leadership and empowerment and educationPersonal Branding Webinar on women leadership and empowerment and education
Personal Branding Webinar on women leadership and empowerment and educationRichaGoel44
 
Bdian session.pptx
Bdian session.pptxBdian session.pptx
Bdian session.pptxRichaGoel44
 
digital markt ppt.pptx
digital markt ppt.pptxdigital markt ppt.pptx
digital markt ppt.pptxRichaGoel44
 
Sale_of_goods_act_913275503 (1).ppt
Sale_of_goods_act_913275503 (1).pptSale_of_goods_act_913275503 (1).ppt
Sale_of_goods_act_913275503 (1).pptRichaGoel44
 
INTERNATIONAL_MONETARY_FUND.pptx
INTERNATIONAL_MONETARY_FUND.pptxINTERNATIONAL_MONETARY_FUND.pptx
INTERNATIONAL_MONETARY_FUND.pptxRichaGoel44
 
foreigntradepolicy 2015-2020.pptx
foreigntradepolicy 2015-2020.pptxforeigntradepolicy 2015-2020.pptx
foreigntradepolicy 2015-2020.pptxRichaGoel44
 
commercial bank.ppt
commercial bank.pptcommercial bank.ppt
commercial bank.pptRichaGoel44
 
Intro to World War -1(1914-1918).pptx
Intro to World War -1(1914-1918).pptxIntro to World War -1(1914-1918).pptx
Intro to World War -1(1914-1918).pptxRichaGoel44
 
intro to macro.ppt
intro to macro.pptintro to macro.ppt
intro to macro.pptRichaGoel44
 
Balance of payments[1].ppt
Balance of payments[1].pptBalance of payments[1].ppt
Balance of payments[1].pptRichaGoel44
 
companies-act-1956.ppt
companies-act-1956.pptcompanies-act-1956.ppt
companies-act-1956.pptRichaGoel44
 

More from RichaGoel44 (20)

hubbard01_instructorppt02.ppt comparativ
hubbard01_instructorppt02.ppt comparativhubbard01_instructorppt02.ppt comparativ
hubbard01_instructorppt02.ppt comparativ
 
hubbard01_instructorppt01.ppt eco founda
hubbard01_instructorppt01.ppt eco foundahubbard01_instructorppt01.ppt eco founda
hubbard01_instructorppt01.ppt eco founda
 
EXIM procedures & documentation for.pptx
EXIM procedures & documentation for.pptxEXIM procedures & documentation for.pptx
EXIM procedures & documentation for.pptx
 
Business_Cycles working fiscal measures .ppt
Business_Cycles working fiscal measures .pptBusiness_Cycles working fiscal measures .ppt
Business_Cycles working fiscal measures .ppt
 
1. Concept of Business Env bvhjhkjljj.ppt
1. Concept of Business Env bvhjhkjljj.ppt1. Concept of Business Env bvhjhkjljj.ppt
1. Concept of Business Env bvhjhkjljj.ppt
 
Role of Government in organized society; Changing Perspective- government in ...
Role of Government in organized society; Changing Perspective- government in ...Role of Government in organized society; Changing Perspective- government in ...
Role of Government in organized society; Changing Perspective- government in ...
 
Musgrave theory of comparaitive advantage in public finance
Musgrave theory of comparaitive advantage in public financeMusgrave theory of comparaitive advantage in public finance
Musgrave theory of comparaitive advantage in public finance
 
Personal Branding Webinar on women leadership and empowerment and education
Personal Branding Webinar on women leadership and empowerment and educationPersonal Branding Webinar on women leadership and empowerment and education
Personal Branding Webinar on women leadership and empowerment and education
 
Bdian session.pptx
Bdian session.pptxBdian session.pptx
Bdian session.pptx
 
Lecture01.ppt
Lecture01.pptLecture01.ppt
Lecture01.ppt
 
digital markt ppt.pptx
digital markt ppt.pptxdigital markt ppt.pptx
digital markt ppt.pptx
 
Sale_of_goods_act_913275503 (1).ppt
Sale_of_goods_act_913275503 (1).pptSale_of_goods_act_913275503 (1).ppt
Sale_of_goods_act_913275503 (1).ppt
 
INTERNATIONAL_MONETARY_FUND.pptx
INTERNATIONAL_MONETARY_FUND.pptxINTERNATIONAL_MONETARY_FUND.pptx
INTERNATIONAL_MONETARY_FUND.pptx
 
foreigntradepolicy 2015-2020.pptx
foreigntradepolicy 2015-2020.pptxforeigntradepolicy 2015-2020.pptx
foreigntradepolicy 2015-2020.pptx
 
NI.PPT
NI.PPTNI.PPT
NI.PPT
 
commercial bank.ppt
commercial bank.pptcommercial bank.ppt
commercial bank.ppt
 
Intro to World War -1(1914-1918).pptx
Intro to World War -1(1914-1918).pptxIntro to World War -1(1914-1918).pptx
Intro to World War -1(1914-1918).pptx
 
intro to macro.ppt
intro to macro.pptintro to macro.ppt
intro to macro.ppt
 
Balance of payments[1].ppt
Balance of payments[1].pptBalance of payments[1].ppt
Balance of payments[1].ppt
 
companies-act-1956.ppt
companies-act-1956.pptcompanies-act-1956.ppt
companies-act-1956.ppt
 

Recently uploaded

The Inspirational Story of Julio Herrera Velutini - Global Finance Leader
The Inspirational Story of Julio Herrera Velutini - Global Finance LeaderThe Inspirational Story of Julio Herrera Velutini - Global Finance Leader
The Inspirational Story of Julio Herrera Velutini - Global Finance LeaderArianna Varetto
 
AnyConv.com__FSS Advance Retail & Distribution - 15.06.17.ppt
AnyConv.com__FSS Advance Retail & Distribution - 15.06.17.pptAnyConv.com__FSS Advance Retail & Distribution - 15.06.17.ppt
AnyConv.com__FSS Advance Retail & Distribution - 15.06.17.pptPriyankaSharma89719
 
Cryptocurrency Security Reinvented: The Leadership of Verified Binance Accounts
Cryptocurrency Security Reinvented: The Leadership of Verified Binance AccountsCryptocurrency Security Reinvented: The Leadership of Verified Binance Accounts
Cryptocurrency Security Reinvented: The Leadership of Verified Binance AccountsAny kyc Account
 
Economic Risk Factor Update: April 2024 [SlideShare]
Economic Risk Factor Update: April 2024 [SlideShare]Economic Risk Factor Update: April 2024 [SlideShare]
Economic Risk Factor Update: April 2024 [SlideShare]Commonwealth
 
Overview of Inkel Unlisted Shares Price.
Overview of Inkel Unlisted Shares Price.Overview of Inkel Unlisted Shares Price.
Overview of Inkel Unlisted Shares Price.Precize Formely Leadoff
 
Call Girls Near Me WhatsApp:+91-9833363713
Call Girls Near Me WhatsApp:+91-9833363713Call Girls Near Me WhatsApp:+91-9833363713
Call Girls Near Me WhatsApp:+91-9833363713Sonam Pathan
 
Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170
Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170
Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170Sonam Pathan
 
NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...
NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...
NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...Amil baba
 
NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...
NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...
NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...Amil baba
 
Chancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdf
Chancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdfChancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdf
Chancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdfcoingabbar
 
Stock Market Brief Deck for "this does not happen often".pdf
Stock Market Brief Deck for "this does not happen often".pdfStock Market Brief Deck for "this does not happen often".pdf
Stock Market Brief Deck for "this does not happen often".pdfMichael Silva
 
Gender and caste discrimination in india
Gender and caste discrimination in indiaGender and caste discrimination in india
Gender and caste discrimination in indiavandanasingh01072003
 
Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...
Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...
Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...Amil baba
 
Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...Amil baba
 
Bladex 1Q24 Earning Results Presentation
Bladex 1Q24 Earning Results PresentationBladex 1Q24 Earning Results Presentation
Bladex 1Q24 Earning Results PresentationBladex
 
Liquidity Decisions in Financial management
Liquidity Decisions in Financial managementLiquidity Decisions in Financial management
Liquidity Decisions in Financial managementshrutisingh143670
 
NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...
NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...
NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...Amil baba
 
Stock Market Brief Deck FOR 4/17 video.pdf
Stock Market Brief Deck FOR 4/17 video.pdfStock Market Brief Deck FOR 4/17 video.pdf
Stock Market Brief Deck FOR 4/17 video.pdfMichael Silva
 
Banking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptxBanking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptxANTHONYAKINYOSOYE1
 

Recently uploaded (20)

The Inspirational Story of Julio Herrera Velutini - Global Finance Leader
The Inspirational Story of Julio Herrera Velutini - Global Finance LeaderThe Inspirational Story of Julio Herrera Velutini - Global Finance Leader
The Inspirational Story of Julio Herrera Velutini - Global Finance Leader
 
AnyConv.com__FSS Advance Retail & Distribution - 15.06.17.ppt
AnyConv.com__FSS Advance Retail & Distribution - 15.06.17.pptAnyConv.com__FSS Advance Retail & Distribution - 15.06.17.ppt
AnyConv.com__FSS Advance Retail & Distribution - 15.06.17.ppt
 
Cryptocurrency Security Reinvented: The Leadership of Verified Binance Accounts
Cryptocurrency Security Reinvented: The Leadership of Verified Binance AccountsCryptocurrency Security Reinvented: The Leadership of Verified Binance Accounts
Cryptocurrency Security Reinvented: The Leadership of Verified Binance Accounts
 
Economic Risk Factor Update: April 2024 [SlideShare]
Economic Risk Factor Update: April 2024 [SlideShare]Economic Risk Factor Update: April 2024 [SlideShare]
Economic Risk Factor Update: April 2024 [SlideShare]
 
Overview of Inkel Unlisted Shares Price.
Overview of Inkel Unlisted Shares Price.Overview of Inkel Unlisted Shares Price.
Overview of Inkel Unlisted Shares Price.
 
Call Girls Near Me WhatsApp:+91-9833363713
Call Girls Near Me WhatsApp:+91-9833363713Call Girls Near Me WhatsApp:+91-9833363713
Call Girls Near Me WhatsApp:+91-9833363713
 
Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170
Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170
Call Girls Near Golden Tulip Essential Hotel, New Delhi 9873777170
 
NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...
NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...
NO1 Certified Black Magic Specialist Expert In Bahawalpur, Sargodha, Sialkot,...
 
NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...
NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...
NO1 Certified kala jadu karne wale ka contact number kala jadu karne wale bab...
 
Chancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdf
Chancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdfChancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdf
Chancla Coin Charm- How Slipper Became Crypto Fun's Symbol!.pdf
 
Stock Market Brief Deck for "this does not happen often".pdf
Stock Market Brief Deck for "this does not happen often".pdfStock Market Brief Deck for "this does not happen often".pdf
Stock Market Brief Deck for "this does not happen often".pdf
 
Gender and caste discrimination in india
Gender and caste discrimination in indiaGender and caste discrimination in india
Gender and caste discrimination in india
 
Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...
Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...
Uae-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakist...
 
Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
Uae-NO1 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam Ex...
 
Q1 2024 Newsletter | Financial Synergies Wealth Advisors
Q1 2024 Newsletter | Financial Synergies Wealth AdvisorsQ1 2024 Newsletter | Financial Synergies Wealth Advisors
Q1 2024 Newsletter | Financial Synergies Wealth Advisors
 
Bladex 1Q24 Earning Results Presentation
Bladex 1Q24 Earning Results PresentationBladex 1Q24 Earning Results Presentation
Bladex 1Q24 Earning Results Presentation
 
Liquidity Decisions in Financial management
Liquidity Decisions in Financial managementLiquidity Decisions in Financial management
Liquidity Decisions in Financial management
 
NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...
NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...
NO1 Certified Amil Baba In Lahore Kala Jadu In Lahore Best Amil In Lahore Ami...
 
Stock Market Brief Deck FOR 4/17 video.pdf
Stock Market Brief Deck FOR 4/17 video.pdfStock Market Brief Deck FOR 4/17 video.pdf
Stock Market Brief Deck FOR 4/17 video.pdf
 
Banking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptxBanking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptx
 

Business_Cycles.ppt

  • 1. Business Cycle Is the economy getting better or worse?
  • 2. Micro vs. Macro • Microeconomics: The study of personal, or small finances. – Individuals, families or businesses • Macroeconomics: The study of economic systems on a large scale – National or Global economies
  • 3. Gross Domestic Product • Def. The total value, in dollars, of all final goods and services produced within the nation each year • Abbreviated as the GDP
  • 4. What does the GDP tell us? • If the GDP is larger than last year the economy is expanding (getting bigger) • If the GDP is smaller, the economy is shrinking (getting smaller)
  • 5. Business Cycle • The Business Cycle allows people to understand the direction the economy (GDP) is going (growing or shrinking) and plan accordingly. • The economy follows the Business Cycle regularly.
  • 6. Phases of the Business Cycle Expansion (Growing) Peak (Top) Contraction (Shrinking) Trough (Bottom)
  • 8. Expansion • During a period of expansion: – Wages increase – Low unemployment – People are optimistic and spending money – High demand for goods – Businesses start – Easy to get a bank loan – Businesses make profits and stock prices increase
  • 9. Peak • When the economic cycle peaks: – The economy stops growing (reached the top) – GDP reaches maximum – Businesses can’t produce any more or hire more people – Cycle begins to contract
  • 10. Contraction • During a period of contraction: – Businesses cut back production and layoff people – Unemployment increases – Number of jobs decline – People are pessimistic (negative) and stop spending money – Banks stop lending money
  • 11. Trough • When the economic cycle reaches a trough: – Economy “bottoms-out” (reaches lowest point) – High unemployment and low spending – Stock prices drop But, when we hit bottom, no where to go but up! UNLESS….
  • 12. Recession/Depression • A prolonged contraction is called a recession (contraction for over 6 months) • A recession of more than one year is called a depression
  • 13. What keeps the Business Cycle Going? • 4 variables cause changes in the Business Cycle: 1. Business Investment When the economy is expanding, sales and profit keep rising, so companies invest in new plants and equipment, creating new jobs and more expansion. In contraction, the opposite is true
  • 14. What Keeps the Business Cycle Going? 2. Interest Rates and Credit Low interest rates, companies make new investments, adding jobs. When interest rates climb, investment dries up and less job growth 3. Consumer Expectations Forecasts of an expanding economy fuels more spending, while fear of a recession decreases consumer spending
  • 15. What keeps the Business Cycle Going? 4. External Shocks External Shocks, such as disruptions of the oil supply, wars, or natural disasters greatly influence the output of the economy Ex. 1992-2000 was the longest period of expansion in U.S. history. Early in 2001, signs of contraction appeared, though the Bush administration denied it. The Sept. 11th 2001 terrorist attacks quickly caused the business cycle to shift into a contraction.
  • 16. Who Cares????? • Why should you care about the business cycle and economy? • Lots of reasons!
  • 17. “Don’t quit that job!” • If the economy is going into a contraction, jobs will become more scarce. If you quit, you may not find another job! • But, if the economy is in a period of expansion, jobs are readily available. It may be a good time to switch careers.
  • 18. “Should I make a big purchase?” • Only if you know that you won’t lose your job in a contraction. So, buy your house during an expansion. HOWEVER, • When the economy starts to slow down (contraction), interest rates will decrease. Wait to buy a house until the rates drop to a low point, if you are sure you won’t lose your job.
  • 19. Quick Review! • What phase of the business cycle do wages go up? • Expansion • What phase of the business cycle do wages go down? • Contraction
  • 20. Review cont. • When are wages at their highest? • Peak • When are wages at their lowest? • Trough
  • 21. More Review • When will borrowing decrease? • Contraction • When will borrowing increase? • Expansion • When will borrowing be at it’s lowest? • Trough
  • 22. Even More Review! • When will unemployment be at its lowest? • Peak • When will business profits be the highest? • Peak • When should you look for a new job? • Expansion