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NOTESTHE BUSINESS CYCLE
& INFLATION
Looking at economic cycles illustrates a pattern of good times and bad times.
The movement of the economy from one condition to another and then back again is called the BUSINESS CYCLE.
All nations experience good and bad economic times.
WHAT IS THE BUSINESS CYCLE?
4 PHASES OF THE BUSINESS CYCLE
What is inflation? An increase in the general level of prices.
Buying power decreases Most harmful to people on fixed incomes (retirees)
THE EFFECT ON CONSUMER PRICES
CAUSES OF INFLATION: When demand is higher than
supply. Ex: Newest product releases
Prices rises faster than wages
MEASURING INFLATION
In the US, inflation is measured by CPI Consumer Price Index
Compares prices from one year to the next
Mild inflation should be expected every year Mild inflation = 2-3% increase per
year
Deflation – decrease in the general level of prices May occur for the nation overall or
just specific products (computers & TVs)