THE BUSINESS CYCLE

UNIT 23

Recession in the news…

US slips back into recession

EU sees recession, record dolequeues this year

UN report predicts likely global economic downturn in 2013

LEAD-IN p. 114

The Business Cycle the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time (www.investopedia.com)

/trɒf/

Growth- expansion, upturn Peak- GDP tops out Trough /trɔf/- economic activity

bottoms out Recession- contraction

/kən’trækʃən/, downturn

Viewing http://www.youtube.com/watch?v=EMHkiKxtlvw

“a backwards rollercoaster”3 indicators of recession by NBERdefinition of recession4 phases economic trends in recessionV-shaped recession v. U-shaped recession

Collocations: recession or expansion?

economic activity picks up again

businesses make fewer salesexcess inventories are used

upcompanies earn less revenuenew orders are placedproduction is ramped up again job opportunities improve

businesses cut back on output

unemployment rate goes up

eventually* it reaches a trough.

eventually it tops outconsumers spend less

moneysales improve

* at an unspecified later time, in the end

Collocations: recession v. expansion

economic activity slows downconsumers spend less moneybusinesses make fewer sales inventories build upcompanies earn less revenue fewer orders are placedbusinesses cut back on outputunemployment rate goes upbusinesses reduce the number

of people on payrollseventually it reaches a trough

economic activity picks up again

sales improveexcess inventories are

used upnew orders are placedproduction is ramped up

again job opportunities improveunemployment rate

comes downeventually it tops out

begins abruptlyreaches a trough

quickly recovers quickly

slowdown lingers*takes a long time for

activity to pick up again

* to remain existent although often waning in strength, importance, or influence

V-SHAPED OR U-SHAPED RECESSION?

v U

READING (MK, p. 114,115)

1. What happens to GDP in a business cycle?2. What happens during an upturn? (What tends to

rise?)3. What is a boom?4. What happens during a downturn? (What falls?)5. What is the difference between a recession and a

depression? (Synonyms?)6. What is the most probable cause of the business

cycle?7. How do people behave in good times? And in bad

times?8. How is investment connected with demand? 9. How is internal theory different from external theory?10. What is creative destruction?

Comprehension

IDEAS FOR MINI TALKS

Joseph Schumpeter :economic ideasThe Great Depressionhttp://www.youtube.com/watch?v=VpKmfjf5tUk