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The Business Cycle

The Business Cycle. …the economic roller coaster!. The Business Cycle. Economies naturally go through ups & downs. The business cycle is the rise and fall of economic activity over time. In the United States…

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The Business Cycle

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  1. The Business Cycle …the economic roller coaster!

  2. The Business Cycle • Economies naturally go through ups & downs. • The business cycle is the rise and fall of economic activity over time. • In the United States… • 1930s, 50s, 70s, 2000s characterized by a drop in economic activity & rise in unemployment • Slumps followed by new waves of increased productivity and increased GDP

  3. Stages of the Cycle

  4. Prosperity • Also known as the “peak” • Higher wages, more jobs available, higher demand for goods/services • Unemployment is low, GDP is high • People are spending!

  5. Recession • Economic activity slows down – less production of goods, downturns in industry • GDP decreasing, unemployment increasing • People are starting to save!

  6. Depression • Also known as a “trough” • Deep recession that lasts for years and affects the entire economy • Unemployment is high, GDP is low • Government starts trying to “stimulate” the economy • People are saving!

  7. Recovery • Also known as “expansion” • Rise in business activity after a recession or depression • Innovation occurs – businesses start bringing out new products & services • Unemployment decreasing, GDP increasing

  8. Entrepreneurs Who Rose from the Ashes Many of today’s Fortune 500 companies came from recessions or depressions…

  9. General Motors • The Panic of 1907 • William C. Durant • High school drop-out working as a manager of Buick in Detroit • Acquired Oldsmobile, Cadillac, Pontiac • Launched Chevrolet (later joined GM in 1917)

  10. Playboy Enterprises • Recession of 1953 • Hugh Hefner • Former employee of Esquire who quit when his boss refused to give him a $5 raise • Designed his own magazine with the help of his friends

  11. Sirius Satellite Radio • Early 1990s Recession • Robert Briskman • Former NASA engineer • COO at Geostart(satellite messaging company) • Figured out how to broadcast digital radio signals via satellite • Merged with XM Satellite Radio in 2008 to provide commercial-free radio 24 hrs/day

  12. REVIEW What are the four stages of the business cycle? How is each stage characterized by economic indicators (GDP, Unemployment)?

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