WOB - Economics - L3 the economic cycle

Macroeconomics

Concerned with large-scale economic factors

Macroeconomics examples

Interest rates, prices, national output, unemployment

Microeconomics

Examines small components of the economy

Microeconomics examples

Individuals, households, firms, industries

What are the two main objectives (goals) of macroeconomics

1. Increase living standards in the long run 2. Understanding booms and busts, like The Great Depression.

What is the 'holy grail' of macroeconomics?

How to get economies to grow without crashing.

Phases of the economic cycle

Expansion, Peak, Contraction, Trough

Expansion

Characterised by a noticeable economic growth, increased employment, incomes,production and sales. Steady money supply and investment is increasing

Peak

Increased prosperity and the highest level of economic activity. New businesses open, Production levels are high, Many jobs are available and Unemployment is low

Contraction

Characterised by a noticeable drop in economic activity. Also called a slowdown or downturn. Consumer spending slows and confidence drops. Businesses must work harder to compete and sell their goods and services

Trough

Lowest level of economic activity. Businesses may close, Production slows, jobs are scarce, Unemployment is high

Patterns of Economic Cycle

Recession, Depression, Recovery, Boom

Recession

Severe economic decline over at least six months

Depression

A very severe recession that lasts two or more years

Recovery

Period of economic growth following a recession or depression

Boom

Economic growth reaches its peak