Module 14 Lesson 2

Doug Howard

Business cycle

Prosperity- Unemployment is at a low, and consumers have confidence in the future state of their economy. Producers are expanding their businesses and taking advantage of opportunities. CPI, GDP, and per capita GDP are high.

Contraction- Economic downturn for half a year, consumers hold off big purchases and buy low cost products. Producers slow down production and cut size of their work force. CPI, GDP, and per capita GDP decrease and the banks decrease credit (harder to get loan).

Depression- this is worse than contraction, but sometimes economies dont experience this phase. Unemployment is very high, and there is a decrease in consumer spending. Producers create less goods since there are less people able to buy the goods. CPI, GDP, and per capita GDP are at the lowest point. Banks make it even harder to get a loan.

Recovery- consumer spending increases again and people buy wants as well as needs. Unemployment decreases as businesses need new workers to fill the jobs that need to be filled to satisfy the consumers. CPI, GDP and per capita GDP increase. Banks expand credit again which makes it easier to get a loan.