Financial Management : Production Business Cycle Fiscal Policies : Their Nature and Effect on Economy

1. Unit 2 : Chapter 6
Applications of Macroeconomics Theory as A Basis For
Understanding The Key Economic Variables Affecting The Business
PRODUCTION
BUSSINESS CYCLE
FISCAL POLICIES : THEIR NATURE
AND EFFECT ON ECONOMY
Carolyn B.Delos Reyes
San Juan ,Sto.Tomas, Batangas

2. What is PRODUCTION?
is a process of combining various material inputs
and immaterial inputs (plans, know-how) in order to
make something for consumption (the output). It is
the act of creating output, a good or service which
has value and contributes to the utility of
individuals.(https://en.wikipedia.org/)

3. Production Process : Divided into 5
Big Categories
3.Land
1.Labor
2.Capital
5.Business know-how
4.Intermediate inputs

4. Production Process : Divided into 5
Big Categories
LABOR CAPITAL LAND
Inputs
supplied by
the various
types of the
workers that
enable a
business to
function
Long Lived
physical
equipment,
software and
Structures a
businesses
uses in its
production
process
Actual ground

5. Production Process : Divided into 5
Big Categories
INTER-
MEDIATE INPUTS
BUSINESS
KNOW-HOW
Any goods and
services purchased
from other business
and used in
production
Knowledge and
technology
necessary for the
production process

6. WHAT IS A BUSSINESS CYCLE?
The term "business cycle“
(or economic cycle or boom-bust cycle) refers to
economy-wide fluctuations in production, trade, and
general economic activity.
From a conceptual perspective, the business cycle
is the upward and downward movements of levels
of GDP (gross domestic product) and refers to the period
of expansions and contractions in the level of economic
activities (business fluctuations) around a long-term
growth trend .
Source: Boundless. “The Business Cycle:

7. Business Cycle Phases

8. Business Cycle Phases

9. Business Cycle Phases
Peak Recession Trough Expansion
Is the date
on which a
recession
starts
the increase in
growth rate of
business cycle
achieves its
maximum
limit.
Period of
negative
GDP(Gross
Domestic
Product )
growth
economic
factors, such as
production,
prices, saving
and investment,
starts
decreasing.
The date on which
the recession ends
and the economy
starts heading up
again
the economic
activities of a country
decline below the
normal level, in
trough phase, there is
a rapid decline in
national income and
expenditure.
The time from the
trough, through
recovery and all the
way to next peak
The line of cycle that
moves above the
steady growth line
represents the
expansion phase of a
business cycle. In the
expansion phase,
there is an increase in
various economic
factors

10. WHAT IS FISCAL POLICIES?
by which a government adjusts its spending levels an
tax rates to monitor and influence a nation's economy. It is th
sister strategy to monetary policy through which a central ban
influences a nation's money supply.
defined as governments actions to influence a
economy through the use of taxation and spending. This typ
of policy is used when policy-makers believe the econom
needs outside help in order to adjust to a desired poin
Typically a government has a desire to maintain steady prices
an employment level, and a growing economy
(economics.fundamentalfinance.com)

11. IMPACTS OF FISCAL POLICY
Fiscal Policy
Action
How it can
Help
How it can
Hurt
Increase
government
Spending
Can create jobs
and boosts
GDP(Gross
domestic Product)
and perhaps do
something useful
with spending
Can boosts
inflation and
widen the
budget deficit ,
leading to higher
interest rates and
lower private
investment

12. IMPACTS OF FISCAL POLICY
Fiscal Policy
Action
How it can
Help
How it can
Hurt
Lower taxes Can create jobs
and boost GDP,
and provide
incentives for
work and
investment
Can boost
inflation and
widen the
budget deficit
,leading to higher
interest rates and
lower private
investment

13. IMPACTS OF FISCAL POLICY
Fiscal Policy
Action
How it can
Help
How it can
Hurt
Accept wider
budget deficit
Can create jobs
and boost GDP.
Can lead to
higher interest
rates and lower
privates
investment.
Over the long
run, can lower
productivity and
GDP growth

14. Thank You
& Have a Nice Day

15. QUESTIONS
TRUE OR FALSE
1.Business know-how includes all the
knowledge and technology necessary for the
production process.
2. Fiscal Policies defined as governments actions
to influence an economy through the use of
taxation and spending. This type of policy is used
when policy-makers believe the economy needs
outside help in order to adjust to a desired point.