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  • Business Cycle

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    Parth Midha
    287 vizualizări15 pagini
    The document discusses the business cycle and its four stages: peak, recession/contraction, trough, and recovery/expansion. It explains that the economy naturally fluctuates between periods of growth and decline due to various causes. During expansion, consumer spending and aggregate demand increase, fueling more production, income, and hiring. However, expansions eventually peak as consumer wants are satisfied. Recessions follow as reduced demand leads to falling output and rising unemployment. Governments can intervene to lessen the impact, as was seen during the Great Depression. The cycle then repeats as prices drop low enough to stimulate new demand and purchasing.

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    The document discusses the business cycle and its four stages: peak, recession/contraction, trough, and recovery/expansion. It explains that the economy naturally fluctuates between periods of growth and decline due to various causes. During expansion, consumer spending and aggregate demand increase, fueling more production, income, and hiring. However, expansions eventually peak as consumer wants are satisfied. Recessions follow as reduced demand leads to falling output and rising unemployment. Governments can intervene to lessen the impact, as was seen during the Great Depression. The cycle then repeats as prices drop low enough to stimulate new demand and purchasing.

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPT, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    287 vizualizări15 pagini

    Business Cycle

    Încărcat de

    Parth Midha
    The document discusses the business cycle and its four stages: peak, recession/contraction, trough, and recovery/expansion. It explains that the economy naturally fluctuates between periods of growth and decline due to various causes. During expansion, consumer spending and aggregate demand increase, fueling more production, income, and hiring. However, expansions eventually peak as consumer wants are satisfied. Recessions follow as reduced demand leads to falling output and rising unemployment. Governments can intervene to lessen the impact, as was seen during the Great Depression. The cycle then repeats as prices drop low enough to stimulate new demand and purchasing.

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPT, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    din 15

    The Business Cycle

    BBB4M0 International Business Fundamentals

    Business Cycle

    Economic Instability
    Fluctuations between prosperity & recession

    Changes in Real GDP over time Causes?

    War, inventions, weather, politics, psychology Everything!

    Business Cycle
    Why

    do we care?

    Business Cycle

    4 Stages:
    Peak Recessionary/ Contractionary

    2. 3.

    1.
    Recovery/

    4.
    Trough Depression

    Expansionary

    Recovery/ Expansion
    Surge or upswing in the economy Positive economic news can change attitudes towards spending Indicators:

    Higher output Lower unemployment Inflation


    Leads to higher interest rates Slows consumption

    Recovery/ Expansion
    Consumer Spending Increases

    Increased Aggregate Demand

    Rise in consumer incomes

    Prosperity
    Production Increases More workers are hired less unemployment

    Back to Business Cycle

    Peak
    Prosperity cycle has maxed out Increase in producers competing for market funds Reasons:

    Consumers exhausted the purchasing patterns that pushed up overall demand of goods/services
    Durable goods that drive cycle do not need to be replaced very often (cars, new homes, etc.)

    Consumers' wants are satisfied

    Back to Business Cycle

    Recession/ Contraction

    Real GDP growth is negative, or declines for two consecutive quarters (3-month periods) Inflation growth slowed by rise in interest rates decreasing prices Reduced demand for goods leads to accumulation of inventories decrease in production Layoffs! Influenced heavily by media

    Recession/ Contraction
    Decreased Aggregate Demand
    Consumer Spending Decreases

    Production Decreases Less workers are hired more unemployment Back to Business Cycle

    Fall in consumer incomes

    Recession

    Trough

    People fear the worst


    Begin to save for "rainy days" Cut back on 'big-ticket' items

    Pulls overall demand of goods/services even further


    Recession of 1982 and early 90's

    Prolonged recession with very high unemployment and very low output levels = 'Depression'
    Great Depression of 1930's

    Back to Business Cycle

    Great Depression
    1929 Stock Market Crash = 'Dirty Thirties' Massive Unemployment 27% in 1933 Corporate Profits in 1929 of $396 million turned into corporate losses of $98 million in 1933 From 1929-1933:

    GNP dropped 43% Exports decreased by 50%

    Great Depression

    What did we learn?


    Government intervention may be necessary Social safety net created
    Minimum wage, standard work week, medicare, unemployment insurance, etc.

    Bank of Canada formation (1934) Restrictive trade policies diminished (GATT in 1947)

    Business Cycle

    How do we turn it around again?


    Prices fall extremely low Only can postpone purchases of certain items for so long
    Clothes wear out, worthless to repair car, etc.

    Business Cycle

    Business Cycle Q.'s


    Explain why an expansionary phase tends to "feed itself." Identify 3 characteristics of

    A recession An expansion

    What is the official definition of a recession? How can the media play a role in influencing the business cycle?

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