A 6-step visual walkthrough of Economic Indicators & the Business Cycle — the circular flow, GDP, unemployment, inflation, and the business cycle, built right into the page.
Households supply resources (labor, capital) to firms through the factor market and receive income. Firms sell goods and services back to households through the product market in exchange for spending. Money flows in a continuous loop.
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GDP = C + I + G + Nx
The expenditures approach adds up everyone's spending: Consumption by households, Investment by businesses in capital, Government spending, and Net exports (exports minus imports).
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Who Counts as Unemployed?
Only people who are jobless and actively seeking work count as unemployed. Discouraged workers, retirees, and students are excluded from the labor force entirely — they don't count toward the unemployment rate at all.
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Real vs. Nominal GDP
Nominal GDP rises faster than real GDP whenever prices are rising. The gap between the two lines is inflation — real GDP strips that out to show actual output growth.
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Demand-Pull vs. Cost-Push Inflation
Demand-pull: too much spending chasing too few goods raises prices and, in the short run, output. Cost-push: rising input costs raise prices while output falls — the worst combination for an economy.
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The Business Cycle
Real GDP moves through four repeating phases: expansion (growth), peak (turning point), recession/contraction (decline), and trough (turning point before the next expansion begins).
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How to use the visual review
Spend 30 seconds per step before clicking next. Look at the diagram, then ask yourself: "Could I sketch this from memory and label every part?"
Use the dots below the diagram to jump straight to any step, or the arrow keys to move forward and back.
This is great for review the night before the exam — fast, visual, and covers every core diagram you need to remember from Unit 2.