Business

Business cycle

Recurring change in GDP marked by expansions and recessions

Expansion (business cycle)

When economy is doing well

GDP, output, stock market, business investment increase

Expansion of credit (belief that future income will pay for things)

Unemployment decreases

Inflation increases (prices goes up), happens because of shortage

Peak (business cycle)

Economy at maximum output, unsustainable path

False peaks common- don’t know until after

Recession (business cycle)

Opposite of expansion

Credit tightens, people struggle to pay debt.

Trough (business cycle)

Economy at lowest output

Economy needs intervention

Government and central banks gets involved

False troughs are common

Trendline (business cycle)

Steady economic growth path despite ups and downs

Recession

When GDP for 6 consecutive months (2 consecutive quarters)

Economic Indicators

Models and indicators used to predict possibility of expansion or recession

Indicator includes:
Stock market

Oil Prices

Consumer spending

Output (production)

Unemployment

Unemployed

People 16 and older who are without work, available for work, and have take specific steps to find work

Civilian labor force (labor force)

People who are 16 and older, employed or actively seeking work

Does NOT include: Under 16, military, undocumented workers, black market, students, stay home parents, volunteers, people in prison or gave up seeking job.

Frictional unemployment

Workers between jobs (short term)

Cyclical unemployment

Related to swings in business cycle (short term)

Seasonal unemployment

Resulting from changes in weather or demand for certain products (short term)

Structural unemployment

Removal of a type of job from economy (long term)

Technological unemployment

Workers with less skill are replaced by machines-automation (long term)
Specific type of structural unemployment

Depression

Serve, long term recession

Marked by high unemployment, unproductive manufacturing, shortages, and deflation