Directorate: Curriculum FET

SUBJECT and GRADE: ECONOMICS GRADE 10

TERM 1: Week 7
TOPIC: Macroeconomics
LESSON: Business cycles
PURPOSE OF I must be able to understand the following:
LESSON: • The reasons for business cycles.
• The indicators of business cycles.
• The effects of business cycles.

INTRODUCTION: This section requires knowledge covered in:

Gr. 8 EMS – Government, Standard of living.
Gr. 9 EMS – Circular Flow, Price theory.

KEY CONCEPTS:
CONCEPTS DESCRIPTION
Make flash 1. Exogenous Reasons Factors that originate from outside the economic system
cards. Write 2. Endogenous Reasons They are factors that are part of the economic system
the concept on
the one side 3. Leading indicators Change direction before the economy changes
and the
explanation on 4. Coincidental indicators Change direction the same time as the economy
the other side.
Read through 5. Lagging indicators Changes direction after the economy as a whole changed direction
it daily 6. Economic Growth Refer(s) to an increase in the production of goods and services
Refer(s) to an increase in real GDP

SKILLS: At the end of this lesson, I must be able to:

1. Describe the reasons for business cycles.
2. Explain the indicators of business cycles.
3. Discuss the effects of business cycles.
 NOTES: 1. THE REASONS FOR BUSINESS CYCLES

Hi my name is MEXS. I am EXOGENOUS REASONS

a solid and STABLE guy.
M It is also referred to as the MONETARIST approach to
business cycles
EX EXOGENOUS factors (from outside the system) are the
reasons for expansions and contractions in the economy.

S Monetarists believe that markets are relative STABLE.

Carefully read No government intervention is necessary to smooth out
through the notes. cycles
EXAMPLES • Weather conditions (natural disasters) affect
OF
agricultural productions
EXOGENOUS
FACTORS • Political and technology shocks cause change in
productivity.

Hi my name is KENU. I am a
thin and very unstable guy

ENDOGENOUS REASONS
K It is also known as the KEYNESIAN approach.

ENDOGENOUS factors (factors from within) are the

EN reasons for expansions and contractions in the economy.
U Markets are believed to be UNSTABLE.
Government intervention is needed to smooth out cycles.

EXAMPLES • Changes in the level of consumer spending

OF • Changes in interest rates (a rise in interest rates
ENDOGENOUS can cause a downswing and a decrease in interest
FACTORS
rates can cause an upswing)
 NOTES: 2. THE INDICATORS OF BUSINESS CYCLES

Leading Indicators Lagging Indicators Coincidental Indicators

Carefully read
through the notes.

Leading Indicators
Cha Change direction BEFORE the economy changes.
Predict what is going to happen in the following months in the economy
E.g sale of new motor vehicles, the number of jobs advertised in news papers

Lagging indicators
Changes direction AFTER the econiomy as a whole changed direction.
They reach the turning point a few months after the actual economy has turned
E.g hours worked in construction

Coincidental Indicators
Coincidental indicators
Changes direction THE SAME TIME as the economy,
They indicate the actual state of the economy,
E.g The number of people registered as unemployed.
 3. EFFECTS OF BUSINESS CYCLES
UPSWING
The aggregate supply and Increase
demand Consumers will have more money to
buy more
Suppliers will produce more
Changes in Economic growth Increase, because the economic
activity and productivity increase
Changes in Employment Increase
There is more production and more
labour are needed
Changes in Price levels Increase
More employment leads to more
money in households.
Demand increases and price levels
too.
Impact on the economically They are more likely to find jobs and
vulnerable earn wages and salaries.
They have more money to spend
ADDITIONAL Econ Gr.10 Core Notes https://www.youtube.com/watch?v=Y5jr_zv2Y9M
RESOURCES: Econ Gr. 10 Answer Series
Any CAPS approved textbook
DOWNSWING
Decrease
Consumers will have less
money and will buy less
Suppliers will produce less
Decrease, because
economic activity decrease
Decrease
There is less production and
less labour are needed
Decrease
Less employment leads to
less money in households.
Demand decreases and price
will decrease as well.
People lose their jobs
The poor struggle to meet
their basic necessities
Consolidation 1. Give the correct term for each of the following descriptions
Activities: 1.1 These are factors that affect the business cycle that originate from outside the economic system, for
example technological shocks, weather and natural disasters.
1.2 They are factors that are part of the economic system.
1.3 Change direction before the economy changes.
1.4 Change direction the same time as the economy.
1.5 Changes direction after the economy as a whole changed direction. (5x1) (5)

2. Study the graph below and answer the questions that follow.

2.1 What is the name of the graph above? (1)

2.2 Which point on the graph may be associated with the lowest GDP? (1)
2.3 Briefly describe the term economic growth. (2)
2.4 Briefly explain the effect of a downswing on economic growth. (2)
2.5 How can government reduce unemployment in an economy? (2x2) (4)

3.Discuss any two economic indicators and supply example of each. (4x2) (8)

4, Briefly explain the exogenous reasons as one of the causes of business cycles. (4x2) (8)

5. Briefly discuss the effects of business cycles on aggregate demand and supply and employment. (4x2) (8)
6. How can a leading and a lagging indicator be used by an economist to make forecasts? (4x2) (8)