BUSINESS CYCLES Definition Are the successive periods of

BUSINESS CYCLES Definition Are the successive periods of increasing and decreasing in economic activities.

INDICATORS OF A BUSINESS CYCLE • In order to say the economy is doing well or doing poorly, it is important to look at certain indicators. • Examples of indicators are: - Employment / Unemployment - Prices in economy (Inflation) - Production - Profits / income - Demand – Consumption - Exports

FEATURES OF A BUSINESS CYCLE • A business cycle consist of 4 phase i. e recession; depression; recovery and boom(prosperity) phase. • An upswing phase (recovery and boom) • A downswing (recession and depression) • The highest point is called the peak • The lowest point is called the trough • Trend line – gives the general direction of the economy • A business cycle is measured from peak to peak or from trough to trough.

The four phases of the business cycle 1. The Recession phase • The first indicator of a downswing in the economy • There is a slowdown in the economic activity of a country • There will be an increase in unemployment • Businesses will produce fewer goods and services • There will be less consumption by households • The economy is contracting or getting smaller

2. The depression phase • The downswing in the economy can continue even further and the economy will enter into a depression • There is more unemployment • Businesses do not make money • Household do not spend the little money they make. • The citizens of the country are generally very negative about the economic future • The lowest point of the cycle is the trough

3. The Recovery phase • It indicates the beginning of the upswing or upturn of the economy • Because of good government policies, better technology or improved agricultural harvest, the economy is going to improve. • Business starting to hire more people, ordering more raw material and also taking out more loans • Economic activity in the country slowly starts to increase.

4. The Boom (Prosperity) phase • When the economy is really growing and improving quickly • More businesses open • More workers are hired, profits and salaries increased and more capital equipment is bought • The highest point on the business cycle is the peak.