- Business cycle ? a pattern set by growth or decline in real GNP. (phases: expansion, peak, contraction, and trough.)
- Expansion - a period of growth in real GNP.
- Peak ? the highest point in a business cycle.
- Contraction ? period of decline in real GNP.
- Trough- lowest level the economy reaches during a business cycle.
- Recession ? during the contraction phase of the cycle real GNP declines for two consecutive quarters, or six months.
- Depression ? if a recession is severe and persistent, maybe people out of work and many businesses closed.
- If population increases while production of goods and services remains the same, everyone's share of goods and services will be smaller.
- A combination of increasing supply and increasing demand can cause an economy to enter a long expansionary phase of the business cycle.
- If population grows because of a higher birthrate, demand for certain kinds of goods and services will increase soon.
- If population growth results from immigration, the effects will be different.
- Investment spending of businesses on capital resources, such as machines, tools and factories is another important factor.
- It works with the multiplier effect and acceleration principle.
- Investments may be either autonomous or induced.
- Autonomous Investment ? results from influences outside the economy.
- Induced investment ? encouraged by factors in the economy.
- Productivity ? the efficiency with which goods can be produced.
- 2 factors that improved productivity are expanded education and capital investment.
- Consumer attitudes and expectations influence the general trend of the economy.
- A change in attitude about inflation also may cause a change in consumer spen ...