Module 14 Lesson 2

4 Phases of the business cycle

1) Prosperity/Peak

Prosperity or peak is when the economy is booming. It's easy to get loans and the demand for products are high. The unemployment rate was low because mostly everyone had a job. With everyone having a job the income rate was high. The producers take advantage by expanding the business. Consumers make more purchases. The CPI, GDP, and per capita GDP are high. If I was living during this phase it would be easy to start a family. I would invest stocks in other businesses.

2) Recession/Contraction

A recession is a temporary economic decline, things are starting to go downhill. Trade and industrial activity are reduced, banks decrease credit and its harder to receive loans. Producers slow down and start to lay workers off due to budget cuts. Trade starts to decrease and consumers begin to buy basic products due to income. A fall in the CDI, GDP, and per capita GDP. I would begin saving money and get any investments back that I have.

3) Depression/Trough

A depression is like a recession but just more severe and longer lasting. It is difficult for people to get a loan. The unemployment rate is increasing and its harder for consumers to buy goods. People aren't able to buy needs and wants because of the little or no income. I think it is very hard to live during this phase.

4) Recovery/Expansion

The economy is starting to heal. A period of increasing business and the end of a recession. It takes several month to actually see growth from a recovery. The unemployment rate is decreasing. More people are working and more are starting to invest. CDI, GDP, and per capita GDP are increasing