Business Cycle presentation


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This presentation is based on the business cycle as a whole and its effects in the employment, production, inflation as well as government interference.

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  • See Learning Goal 5: Discuss the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle.Yes, it is true that a recession is two or more consecutive quarters of contracting gross domestic product, but students will be interested to know that for a recession to be officially labeled a recession it must be declared by the National Bureau of Economic Research. Their website,, provides numerous resources to further explain this part of the business cycle.
  • Business Cycle presentation

    1. 1. Business Cycles Presentation This is the collection of different presentations based on the Business Cycles from Slide share. Compiled by Thabani
    2. 2. The Business Cycle BUSINESS CYCLES LG5 • Business Cycles -- Periodic rises and falls that occur in economies over time. • Four Phases of Long-Term Business Cycles: 1. Economic Boom 2. Recession – Two or more consecutive quarters of decline in the GDP. 3. Depression – A severe recession. 4. Recovery – When the economy stabilizes and starts to grow. This leads to an Economic Boom. 2-4
    3. 3. Features of Business Cycles Variable Peak Expansion Recession Trough Industrial Production Increase Rapid increase Decline Lowest Demand Increase Highest Decline Lowest Prices Cost Increase Rapid increase decline rapid decline Increase Rapid decrease Gradual decline Rapid decline Investment Increase High Falls slowly Falls rapidly Employment Gradual increase Rapid increase Falls Rapid falls Liberal Falls Rapid falls Very liberal
    4. 4. Business Cycle • The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables • A business cycle is identified as a sequence of four phases: – Contraction (A slowdown in the pace of economic activity) – Trough (The lower turning point of a business cycle, where a contraction turns into an expansion) – Expansion (A speedup in the pace of economic activity) – Peak (The upper turning of a business cycle)
    5. 5. What does a model of the business cycle look like?
    6. 6. The Business Cycle: diagram Peak Growth Recession GDP Trough or Depression TIME
    7. 7. Business Cycle : Diagram Expansion Recession Expansion Total Output Peak Secular growth trend Trough 0
    9. 9. PHASES OF THE BUSINESS CYCLE • Expansion/Growth: During this phase of the business cycle, consumer and business spending rise. • Peak: After a period of growth, an economy will reach a peak, where business is producing at or near full capacity, and the economy is at or near full employment.
    10. 10. Indicators of Business Cycles There are variables other than real GDP that influence the business cycle. They are classified into three: (1) Leading Indicators: generally change before real GDP changes. Can be used to forecast future output. (2) Coincident Indicators: tend to change at the same time as real output changes eg: as real output increases employment and sales rise Ref: MB p.136
    11. 11. Recession Recession: This is a phase when real GDP begins to decline. Consumers and business reduce their spending, unemployment rises, investment declines, and pessimism about the economy is likely to grow.
    12. 12. Recession
    13. 13. Trough/Depression Trough/Depression: This is the lowest point of the business cycle. Factories will be operating below capacity, allowing unemployment to reach high levels
    14. 14. Sources of Business cycle • AGGREGATE DEMAND • AGGREGATE SUPPLY The degree to which real GDP declines or increases depends on the amount by which AD and AS curve shifts.
    15. 15. Business and a Boom • A boom occurs when national output is rising at a rate faster than the trend rate of growth • It is characterised by HIGH consumer spending, high business confidence, investments and profits • There is a lot more output.
    16. 16. CAUSES OF BUSINESS CYCLES External factors 1. Inventions and innovation: Major changes in technology can influence the business cycle. Usually technological changes move the economy in a positive direction, but this is not always so. 2. Wars and political events: The impact of such events on the economy are very fact specific- in other words, difficult to generalize about.
    17. 17. A THOUGHT ON THE BUSINESS CYCLE The business cycle tends to be selfsustaining. In other words, when in a period of growth, the economy will continue to grow (jobs leading to jobs) until some event (internal or external) intercedes.
    18. 18. A Good Cycle More goods produced More spending More jobs
    19. 19. A Bad Cycle Fewer Jobs Less Spending Fewer Goods Produced
    20. 20. GOVERNMENT AND THE BUSINESS CYCLE • In order to prevent the economy from running too hot (inflation) or too cold (recession/depression), the government often becomes involved in efforts to try and stabilize the economy. • The government has two major tools to try and stabilize the economy and achieve its goals: fiscal policy and monetary policy.
    21. 21. FISCAL POLICY Fiscal policy is the taxing and spending decisions that are made by the President and Congress. • Fiscal policy actions of the government fall into two general categories: 1. Raise or Lower Taxes 2. Increase or Decrease Government Spending.
    22. 22. FISCAL POLICY During a Recession The Government can • Lower taxes and/or • Increase spending These actions boost the economy by putting more money in the hands of people so they can spend it. This is called Expansionary Fiscal Policy
    23. 23. Example of PEPSICo India Business Cycle
    24. 24. Growth Phase – Boom Phase Launched in India in 1988 Consistent Growth. Waves of optimism. Highest point of Expansion. Rise in profits, investment, sales, employment etc.
    25. 25. Expansion RETAIL MARKET SHARE OF BEVERAGE PRODUCTS Bottled Water 13% Teas 3% Sports Drinks 2% Fruit Drinks 16% Colas 66%
    26. 26. Recession Uncertain downfall. Controversies. Outcome- Decline in profits, sales etc.
    27. 27. Revival Turning point from depression into expansion. A result of New Innovation.
    28. 28. References Aggarwal. A, Goyal. R, Jhamb. S, Gaurav. S, Karwa. A, & Rathi. R. (2012). Recesion in Japan& United State: Japan+%26+United+States.03 (March 2014) Bobby. A, Sharma. A, Vineetha. K, Raghvandra. Y, Rohit. P& Vaibhav. J. (2010). Business Cycles: (05 March 2014) Akshbapna. D. (2014): Business cycles: 06 March 2014. Becker. B, (2013). Corporate credit and Business cycle: 05 March 2014. Singla. H, (2012). Business Cycle: 05 March 2014.