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UNIT 8How Does the Health of the EconomyAffect You? (6 days)

UNIT 8 - HOW DOES THE HEALTH OF THE ECONOMYAFFECT YOU? (6 Days)All teaching resources in this document are free for teachers. Here is how to you accessthem:1. Many are hyperlinked in the document, so you can get started right away. 2. Lessons that do not have a hyperlink can be found on the lesson plan resourcecalled Virtual Economics 4.5 or 5.0 (VE). All teachers can and should get thisresource for free by participating in a VCEE training session. Visit www.vcee.orgfor more information.3. Lessons from Financial Fitness for Life are on VE. They also have educationaltechnology tools that can be found here:https://www.econedlink.org/resources/collection/fffl-9-12/Changes in national levels of economic activity have a profound effect on students’ futurewelfare, their job opportunities, the level of their prospective earnings, and the prices theywill pay for things they buy. It is important, therefore, for students to understand possiblecauses of changes in these levels and how such changes can produce economic problems(such as unemployment and inflation) or opportunities (such as increased employment).Understanding these forces equips students to predict the economic consequences ofproposed government policies and to make informed choices among alternative publicpolicy proposals.EPF.5 The student will demonstrate knowledge of a nation’s economic goals,including full employment, stable prices, and economic growth, bya) describing economic indicators, such as gross domestic product (GDP), consumerprice index (CPI), and unemployment rate.Days 1 and 2 What are the nation’s economic goals and how do we measurethem?EPF.5 The student will demonstrate knowledge of a nation’s economic goals,including full employment, stable prices, and economic growth, byb) describing the causes and effects of unemployment, inflation, and reduced economicgrowth.Days 1 and 2 How do unemployment, inflation and reduced economic growthaffect us?EPF.5 The student will demonstrate knowledge of a nation’s economic goals,including full employment, stable prices, and economic growth, byc) describing the fluctuations of the business cycle.Day 1 The business cycle: a picture of the economy over timeEvaluation DayVirginia Council on Economic Education

Virginia Council on Economic Education

EPF.5 The student will demonstrate knowledge of a nation’s economic goals,including full employment, stable prices, and economic growth, bya) describing economic indicators, such as gross domestic product (GDP), consumerprice index (CPI), and unemployment rate.Days 1 and 2 - What are the nation’s economic goals and howdo we measure them?Content KnowledgeA nation’s overall levels of income, employment, and prices are determined by theinteraction of spending and production decisions made by households, firms, governmentagencies, foreign markets, and others in the economy.Economic goals include● full employment, which is measured by the unemployment rate● stable prices, measured by indices such as the Consumer Price Index and● economic growth, measured by real gross domestic product (GDP).1VocabularyInflation - A rise in the general or average price level of all the goods and servicesproduced in an economy. Can be caused by pressure from the demand side of the market(demand-pull inflation) or pressure from the supply side of the market (cost-pushinflation).Gross domestic product - The market value of all final goods and services produced in acountry in a calendar year.Real gross domestic product - GDP measured in dollars of constant purchasing power.The measure is obtained by adjusting nominal GDP (GDP measured in current prices) byan appropriate price index, usually the implicit price deflator. Often used as a measure ofeconomic activity.Consumer price index - A price index that measures the cost of a fixed basket ofconsumer goods and services and compares the cost of this basket in one time period withits cost in some base period. Changes in the CPI are used to measure inflation.Unemployment - The number of people without jobs who are actively seeking work.Unemployment rate - The number of unemployed people, expressed as a percentage ofthe labor force.Intermediate good - A good that is used in the production of final goods and servicesVirginia Board of Education FrameworkGross domestic product (GDP) is a basic measure of a nation’s economic output andincome. It is the total market value of all final goods and services produced in theeconomy in one year.Virginia Council on Economic Education

Nominal GDP is measured in current dollars; thus an increase in GDP may reflect notonly increases in the production of goods and services, but also increases in prices. GDPadjusted for price changes is called real GDP. Economic growth is measured by real grossdomestic product.Real GDP per capita is a measure that permits comparison of material living standardsover time and among people in different nations. It is calculated by dividing real GDP bythe population.The potential GDP for a nation is determined by the quantity and quality of its naturalresources, the size and skills of its labor force, and the size and quality of its capitalresources.The consumer price index (CPI) is the most commonly used measure of price-levelchanges. It can be used to compare the price level in one year with price levels in earlieror later periods. (It is an imperfect measure because the market basket of goods includedcannot reflect everyone’s spending, and it does not take into account improvements inthose products.)The unemployment rate indicates the level of unemployment in the country. Theunemployment rate is the percentage of the labor force (not population) who are notworking and are actively seeking paid work. The labor force includes persons over age 16who are working for pay or actively seeking paid work.The unemployment rate is an imperfect measure because it does not (1) include workerswhose job prospects are so poor that they are discouraged from seeking jobs or (2) reflectunder-employed people such as part-time workers who are looking for full-time work.Teaching Tips1) What makes a healthy economy? The economy is growing—producing more goodsand services for its citizens than the year before. Nearly everyone who wants to work hasa job. Prices are stable—not rising or falling very much.2) Why do you want a healthy economy? If you are looking for a job—a healthyeconomy is growing and creating jobs. If you have a job—a healthy economy will helpyour company grow and keep your job secure. A healthy economy will have stable pricesso you can plan, and your money will maintain its purchasing power.3) Explain that just as a doctor needs a thermometer to see if you have a temperature,economists need ways to measure things to see how the economy is doing.Economic growth is measured by the gross domestic product—GDP. This is the sum ofthe prices of all of the final goods and services produced in the country in one year.Explain that intermediate goods are not included—things like tires on a new car. To countboth the value of the new car and the value of the tires on it would lead to doubleVirginia Council on Economic Education

counting. So, only final goods are included. Unpaid work—such as housework and yardwork done for no pay are not included. Things produced in previous years andre-sold—such as homes—are not included because they weren’t produced this year.However, the money earned by the real estate agent is included. GDP can be calculatedby adding up the things that are produced, or by adding up the spending that pays forthem. The latter is calculated C+I+G+(X-M) = GDP—which means spending byconsumers, plus spending by businesses on investment, plus spending by government forgoods and services plus net exports (which is exports minus imports).NOTE: Measuring productivity using GDP is covered in Unit 2. If done there,calculating GDP and what it means need only be refreshed here to the extentnecessary.4) The teacher may wish to show or assign this youtube video on GDP:http://www.youtube.com/watch?v=yUiU_xRPwMc5) Economic growth is generally considered positive because when we produce more as acountry, we can consume more. And more production generally leads to more jobs—anda growing population needs more jobs each year.When inflation pushes prices up, GDP may give the illusion of growth—even when thesame amount is being produced. Thus, it is important to remove the effects of inflation.When GDP is adjusted for inflation, the number that remains is called “real GDP’.6) The economic indicator for full employment is the unemployment rate. Theunemployment rate tells the percentage of people in the labor force (not the population)who are looking for a job and can’t find one. The labor force consists of everyone whohas a job and everyone who is trying to get a job. Some people in the population are notin the labor force perhaps because they do not wish to work, they are too old or tooyoung, they are in prison, or they are unable to work. The formula for the unemploymentrate is# of people seeking jobs divided by the labor force.7) The economic indicator for stable prices is the Consumer Price Index (CPI). The CPImeasures inflation in consumer goods. Inflation is an increase in the overall pricelevel—sometimes referred to as an increase in the cost of living. Inflation is not whengas prices rise or coffee prices rise—it is when prices in general are rising.Monetary inflation results from a money supply that is growing faster than grossdomestic product. There is a direct relationship between the growth of money, thegrowth of output and the price level. If money supply grows faster than output, pricesrise. If money supply grows more slowly than output, prices fall.The Consumer Price Index is calculated using a market basket of items considered typicalof consumer purchases. It includes categories such as housing, transportation, medical,Virginia Council on Economic Education

food (home and restaurant) and recreation. The cost of the items in the market basket inthe base year is set equal to 100. If the CPI increases by 10% in the following year, thenew CPI will be 110. The CPI, then, tells the percentage increase in consumer pricessince the base year. A CPI of 140 would be saying that prices have risen by 40% since thebase year.8) The New York Times interactive below is a very good (although somewhat dated)graphic that can help students see what items are in the CPI and their relative importance.Have students examine the graphic and explain what products or services in the CPIeither don’t apply to them or their family, or that they think may be weighted differently(either heavier or lighter representing more or less use) for their family.9) Suppose news reports are giving the CPI, the Unemployment Rate and the percentagechange in the GDP. How will you know if it is good news or bad news?Have students, in groups, write down all three and guess what a healthy rate would be foreach. Have them write their answers for each in large print on a piece of paper and whenyou ask what would be a good rate for the CPI—have them hold up that answer. It’slikely that answers will vary considerably. For the CPI, a rate of 3% or less is consideredacceptable. If prices are rising more than that, the government and the Federal ReserveBank will be worried about inflation—and perhaps take action. (This subject is addressedin greater depth in Unit 9 on monetary and fiscal policy). For the GDP, a rate in the3-3.5% range is considered good. If GDP growth is less than that, the economy is notcreating enough jobs to provide work for the new people entering the labor force. If GDPgrowth is greater than that, there may be concerns about inflation—if the economy isoperating at full employment. For the unemployment rate, the economy is said to beoperating at full employment when the unemployment rate is 5-6%. There will never be0% unemployment because there will always be some people between jobs (calledfrictional unemployment), and some people whose skills are no longer needed –forexample, typewriter repair (called structural unemployment). When people can’t findjobs because the economy is growing too slowly, it’s called cyclical unemployment.10) Assign students to look up current rates and discuss whether these indicate a healthyeconomy. Current data for these economic indicators and an explanation of what theymean and how they are calculated can always be found on the EconEdLink website setout here and below.http://www.econedlink.org/economic-resources/focus-on-economic-data.php11) Teachers may want to use an activity that compares GDP of various nations to GDPof the various United States. A recent example can be found at the Economist site listedhere.http://www.economist.com/blogs/dailychart/2011/01/comparing_us_states_countries10. GDP per capita is the measure most often used when talking about standard of living.Have the students divide the GDP by the population to arrive at a basic measure ofstandard of living – per capita GDP. (What each person’s share would be if dividedequally.) Explain that the country with the highest GDP may not have the highestVirginia Council on Economic Education

standard of living. A country with a GDP of $500,000 and 500 people would have a GDPper capita of $1,000. Whereas a country with a GDP of $1,000,000 and a population of2,000 would have a GDP per capita $250.Lessons and ResourcesFocus High School Economics Lesson 18: Economic ups and downsCivics and Government: Focus on Economics Lesson18: Economic Indicators forInformed CitizensAP Macroeconomics Lesson 2: Macroeconomic Goals and GDP and Lesson 3: PriceIndexes and Inflation; and Lesson 4: UnemploymentCapstone Lesson 31: Measuring Unemployment: A Labor Market Mystery; and Lesson33: Gross Domestic Product (GDP) and How to MeasureOnlineEconEdLink.org Unemployment Data: Is the Economy Healthy?https://www.econedlink.org/resources/unemployment-data-is-the-economy-healthy/New York Times interactive graphic on the CPI:http://www.nytimes.com/interactive/2008/05/03/business/20080403_SPENDING_GRAPHIC.htmlEconEdLink data on indicators:https://www.econedlink.org/resources/focus-on-economic-data-the-federal-reserve-and-monetary-policy-march-20-2015/Activity comparing GDP of various nations:http://www.economist.com/blogs/dailychart/2011/01/comparing_us_states_countriesPBS Commentator Paul Solman video clip, Tracking Inflation: How Fast are PricesRising?https://www.econedlink.org/resources/making-sene-with-paul-solman-tracking-inflation-how-fast-are-prices-rising/Econedlink lesson: How is our economy doing?https://www.econedlink.org/resources/how-is-our-economy-doing/St. Louis Federal Reserve graphs and data.https://fred.stlouisfed.org/Virginia Council on Economic Education

VideoUnemployment: http://www.yadayadayadaecon.com/clip/39/CartoonsInflation: http://www.dilbert.com/2008-09-15/Music about unemploymentPaperback Writer – The BeatlesThe River – Bruce SpringsteenTake This Job and Shove It – Johnny PaycheckSpinning Wheel – Blood, Sweat and TearsThat’s Just the Way It Is – Bruce Hornsby and the RangeMusic about inflationPain in the Gas – Billy Ray CyrusVirginia Council on Economic Education

EPF.5 The student will demonstrate knowledge of a nation’s economic goals,including full employment, stable prices, and economic growth, byb) describing the causes and effects of unemployment, inflation, and reducedeconomic growth.Days 1 & 2 - How do unemployment, inflation and reducedeconomic growth affect us?Content KnowledgeInflation and unemployment are costly to individuals and affect economic growth andstandards of living. Some aspects of inflation and unemployment can be addressed withpublic policies. Various political leaders and parties often have different ideas aboutwhich policies should be followed to deal with inflation and unemployment, however.The controversial policies, and the fact that almost everyone is affected by unemploymentor inflation, explain why these two problems and alternative approaches to combat themare so widely reported in the news media, and why understanding them is important topeople in a democratic political system.Unemployment imposes costs on individuals and the overall economy. Inflation, bothexpected and unexpected, also imposes costs on individuals and the overall economy.Unemployment increases during recessions and decreases during recoveries.Students will be able to use this knowledge to make informed decisions by anticipatingthe consequences of inflation and unemployment.2VocabularyUnemployment - The number of people without jobs who are actively seeking work.Unemployment rate - The number of unemployed people, expressed as a percentage ofthe labor force.Deflation - A sustained decrease in the average price level of all the goods and servicesproduced in the economy.Discouraged worker - Unemployed people who have given up looking for work and aretherefore not counted as part of the labor force.Inflation - A rise in the general or average price level of all the goods and servicesproduced in an economy. Can be caused by pressure from the demand side of the market(demand-pull inflation) or pressure from the supply side of the market (cost-pushinflation).Recession - A decline in the rate of national economic activity, usually measured by adecline in real GDP for at least two consecutive quarters (i.e., six months).Virginia Council on Economic Education

Virginia Board of Education FrameworkWhen total demand is greater than the value of a nation’s output of final goods andservices, GDP rises, inflation occurs, and/or employment rises. When desiredexpenditures for consumption, investment, government spending, and net exports are lessthan the nation’s output of final goods and services, GDP decreases and inflation and/oremployment decreases.Unemployment imposes costs on individuals and nations. Unexpected inflation imposescosts on many people and benefits some others. In the long run, inflation results from anincrease in a nation’s money supply that exceeds an increase in its output of goods andservices.Unemployment rates differ for people of different ages, races, and gender. This reflectsdifferences in work experience, education, training, and skills.Unemployment can be caused by people changing jobs, seasonal fluctuations in demand,changes in the skills needed by employers, or cyclical fluctuations in the level of nationalspending. Unemployment has costs for society as well as for individuals. Whenunemployment is high, the economy will not produce as much as it could.Inflation is an increase in the general level of prices. It reduces the value of money. Whenpeople’s incomes increase more slowly than the inflation rate, their purchasing powerdeclines. Cost-push inflation occurs when businesses raise prices to cover increasingcosts, such as higher oil prices or rising wages. Demand-pull inflation occurs whendemand for goods and services is greater than the supply. This can occur when people,anticipating higher prices, buy more in the present and push for higher wages, causing awage-price spiral. Inflation also results from increases in a nation’s money supply thatexceeds increases in its output of goods and services.The costs of inflation are different for different groups. Unexpected inflation hurts saversand people on fixed incomes; it helps people who have borrowed money at fixed rates ofinterest. It can help those who own tangible resources that increase in value (e.g., homes,land).Deflation is a decrease in the general level of prices. It increases the value of money anddecreases the value of tangible assets such as homes. Deflation is generally accompaniedby rising unemployment. Consumers, worried about the future, reduce spending, causingmore unemployment. The process can become a downward spiral.Teaching Tips1) In the previous day’s lessons students learned about inflation, unemployment,economic growth and how they are measured. Now students will learn what causes eachand how they can affect them.Virginia Council on Economic Education

What are the causes and costs of unemployment? Unemployment is caused by aslowdown in the economy. When people are unemployed, a cost to society is that theeconomy produces less than it might otherwise. Unemployed people may also receiveunemployment benefits to help tide them over until they get a job—this is a cost totaxpayers. There are many costs to individuals who are unemployed. In addition to a lossof income, which may cause the loss of a home and other possessions, there is stress onthe individual and the family. Divorce and violence in households increase.The person who has lost his/her job has likely lost health insurance benefits as well. Andthe unemployed person may find his/her skills becoming less strong if unemploymentlasts for many months.3) At this point the teacher may want to show either of the two Paul Solman videos belowon unemployment among ‘99ers and calculating unemployment.4) Causes of unemployment—Some people are unemployed because they have quit onejob and are looking for another. This is called frictional unemployment and economistsdo not worry about this type of unemployment. Some people are unemployed becausethe skills they have are no longer needed. This is called structural unemployment and isof more concern. The government may implement training programs to help people gainskills that will make them employable. When people are unemployed because theeconomy has slowed down it is called cyclical unemployment. (The name comes fromthe idea that they are unemployed because of a downturn in the businesscycle—discussed later in this unit.) In this case, the government works to get theeconomy going and hopes the people who were laid off will be hired back. Some peopleare unemployed because their work is seasonal—farm workers, workers at amusementparks. Thus the causes of unemployment can be different—but the costs to society andthe individual are the same.5) As we previously learned, inflation is a rise in the general price level—not an increasein food, or oil or health care. When prices rise it takes more money to buy things than itdid before. Thus, economists say money loses some of its “purchasing power.” Inflationcan be caused by the availability of too much money in the economy. For example, inGermany after WWI, the government ran the printing presses to pay its bills. As a resultthe value of the money fell. Inflation can be worsened as people buy more thingsbecause they fear they will cost more later. This is called demand pull inflation. Workersdemand wage increases to pay the rising prices of goods and services. This increases thecost of production and pushes up prices. This second kind of inflation is called cost-pushinflation.6) What are the effects of inflation? Some people are helped by inflation while others arehurt. People who are on fixed incomes are hurt because they are receiving the sameamount of money and the things they are buying cost more. Businesses are hurt becausethe cost of the resources they must buy is rising so it costs more to produce their good orservice—and they may not be able to raise their price to consumers to cover that increase.Virginia Council on Economic Education

Businesses are also hurt because the uncertainty caused by inflation makes it difficult toplan. Savers are hurt by inflation because the money they have saved will not buy asmuch as it used to.Other people are helped by inflation. People who own tangible assets such as houses andland will see the value of those assets rise with inflation. (Although cars are tangibleassets, they depreciate with time…unless they are antiques.) People who borrow moneyand pay back at a rate of interest that is less than the rate of inflation will benefit frominflation.7) What is deflation? Deflation is the opposite of inflation—it is falling prices.What are the effects of deflation? The value of people’s assets will fall—sometimes theywill owe more on the asset than the asset is worth (called being upside down). When thevalue of people’s assets fall, they feel less wealthy and do not spend; this can slow theeconomy more.8) What are the causes and effects of reduced economic growth? The economy growswhen more is produced. That can happen when more workers are added or moreresources become available. Generally it happens because of increased productivity. Inthe 20thcentury the US economy grew because of increased productivity due toinnovation and mechanization. Nearly 90% of the workforce was involved in farming in1900. By the end of the century only 3% of the labor force grew the food for the nation.This increase in productivity was largely the result of improved farming practices andimproved equipment. Other industries increased productivity as well. Toward the end ofthe century, computers and the internet greatly increased productivity. When the economygrows it generally produces more jobs.Market economies tend to go through cycles where the economy expands and thencontracts. When the growth slows, fewer goods and services are produced,unemployment increases and the economy contracts.Growth is fueled by the spending of consumers, businesses, government and foreignbuyers (exports). When total spending by these groups goes down, the economy will slowand will not expand again until total spending by these groups increases. In fact, when theeconomy is slow, people worry about the future and save more, rather than spend. Thiscauses the economy to slow even more. Consider viewing “The Paradox of Thrift” listedbelow.9) Consider using the online lesson “What’s happening in the new economy.”Lessons and ResourcesCapstone Lesson 32: The Effects of InflationFocus: Middle School Economics Lesson 6 - InflationVirginia Council on Economic Education

Playful Economics - Lesson 14 -Inflation - When All Prices Rise (Demonstratinginflation using play-doh.)Teaching Financial Crises Lesson 4 - The Japan Comparison. (A lesson about deflation.)The Trial of Ms. Ann Flation A copy can be found here.http://economicsondemand.weebly.com/uploads/4/0/5/0/40509201/unit_3_-_lesson_-_infaltion_-_debate_-_duke.pdfOnlineSeinfeld clip on unemployment:http://www.yadayadayadaecon.com/clip/39/Paul Solman video: Many left uncounted in the unemployment ratehttps://www.econedlink.org/resources/making-sene-with-paul-solman-many-left-uncounted-in-official-jobless-rate/Paul Solman video: Unemployment takes toll on 99’ershttps://www.youtube.com/watch?v=JmC16-sWX4QPaul Solman video: Realities of the Recessionhttps://econedlink.org/resources/making-sene-with-paul-solman-realities-of-the-recession-and-changing-workforce/Paul Solman video—Freelancers lack safety net when jobs are scarcehttps://www.econedlink.org/resources/making-sene-with-paul-solman-freelancers-lack-safety-net-when-jobs-are-scarce/?view=studentPaul Solman video—In a slumping economy, a shift in shopping habitshttps://www.econedlink.org/resources/making-sene-with-paul-solman-in-slumping-economy-a-shift-in-shopping-habits/rVirginia Council on Economic Education

EPF.5 The student will demonstrate knowledge of a nation’s economic goals,including full employment, stable prices, and economic growth, byc) describing the fluctuations of the business cycle.Day 1 - What’s a business cycle?Content KnowledgeFluctuations in a nation’s overall levels of income, employment, and prices aredetermined by the interaction of spending and production decisions made by allhouseholds, firms, government agencies, and others in the economy. Recessions occurwhen overall levels of income and employment decline. Students will be able to use thisknowledge to interpret media reports about current economic conditions and explain howthese conditions can influence decisions made by consumers, producers, and governmentpolicy makers.Changes in national levels of economic activity have a profound effect on students’ futurewelfare, their job opportunities, the level of their prospective earnings, and the prices theywill pay for things they buy. It is important, therefore, for students to understand possiblecauses of changes in these levels and how such changes can produce economic problems(such as unemployment and inflation) or opportunities (such as increased employment).Understanding these forces equips students to predict the economic consequences ofproposed government policies and to make informed choices among alternative publicpolicy proposals.2VocabularyBusiness cycle--Fluctuations in the overall rate of national economic activity withalternating periods of expansion and contraction; these vary in duration and degrees ofseverity; usually measured by real gross domestic product (GDP).Expansionary phase—phase of the business cycle where economic growth is increasingand unemployment is fallingContractionary phase—phase of the business cycle where economic growth isdecreasing and unemployment is risingPeak—point in the business cycle where growth peaks and begins to slow, oftencharacterized by inflation and/or low unemploymentTrough—point in the business cycle where growth hits its low point and has not startedto improve, often characterized by high unemployment and low inflationVirginia Board of Education FrameworkThe business cycle is the pattern of alternating periods of expansion (growth) andcontraction (slowdown) in the economy. The model of the business cycle looks like aroller coaster going up and down but trending upward over time.Virginia Council on Economic Education

The business cycle has several phases. When the business cycle is moving upward it is inthe expansionary phase (B), with unemployment decreasing and growth increasing.Ultimately, the economy will reach a peak (A), likely to be characterized by lowunemployment and inflation. The economy will eventually begin to slow and enter acontractionary phase (D), with unemployment rising and growth slowing. Finally, theeconomy will bottom out in the phase known as the trough (C), where growth will beslow, prices low, and unemployment high. A prolonged contraction is called a recession;if it is especially long and severe it is called a depression. At some point, the economywill begin to grow again and enter the expansionary phase.Classical economists like Adam Smith believed the economy to be self-correcting in thelong run. During the Great Depression, British economist John Maynard Keynesfamously said, “In the long run we’re all dead,” and recommended government action tostimulate demand and get the economy going again.Teaching Tips1) Draw a picture of the business cycle on the board. Ask students what it looks like.More than likely they will say it looks like a roller coaster. Explain that it is a modelcalled the business cycle. It is a picture of economic growth over a period of time. Likeon a roller coaster, people are optimistic as it’s going up, sometimes forgetting that atsome point it’s likely to turn down.2) A business cycle involves fluctuations of real GDP around its potential level. (Thestraight line through the middle represents its potential level.) Fluctuations of real GDParound its potential level occur when overall spending declines, as in a recession, or whenoverall spending increases rapidly, as in recovery from a recession or in an expansion.When real GDP rises above its potential, there is a tendency for inflation to rise. Whenreal GDP is below its potential (as in a recession), there is a tendency for inflation to falland unemployment to rise.4) Be sure that students can draw and label a business cycle, and that they know whateconomic conditions are likely to exist at points A, B, C and D.Virginia Council on Economic Education

5) The roller coaster shaped business cycle is just a sample. Sometimes, the economypops right back up, and the shape between the contraction and the expansion is a “V”.Sometimes the economy stays in the trough a long time and that trough is a “U” shape.Sometimes the economy does a double dip: it starts back up and then goes back down,and looks like a “W”. The government often pursues policies to stimulate the economyin hopes the trough will bounce right back and look like a “V.”Lessons and ResourcesAP Macroeconomics Unit 2: Lesson 5: Business CyclesFocus: High School Economics Lesson 18: Economic Ups and DownsOnlinePaul Solman video, W, V, U or L: How Is the Economic Recovery Shaping Up, Literally?https://www.econedlink.org/resources/making-sene-with-paul-solman-w-v-u-or-l-how-is-the-economic-recovery-shaping-up-literally/?view=studentMJM Foodie video: Business cycles:http://www.youtube.com/watch?v=jGP-vPEHRRE&feature=bf_next&list=PLF2A3693D8481F442&lf=plcpEVALUATION DAYVirginia Council on Economic Education