1. Business Cycles Presentation This is the collection of
different presentations based on the Business Cycles from Slide
share. Compiled by Sabelo Madise Institution: University of
Johannesburg
2. 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)
3. BUSINESS CYCLES 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. LG5 2-4
4. 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.
5. 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
for example: as real output increases employment and sales rise
Ref: MB p.136
6. 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.
7. 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
8. 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.
9. 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.
10. A THOUGHT ON THE BUSINESS CYCLE The business cycle tends to
be self- sustaining. 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.
11. 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.
12. Features of Business Cycles Variable Expansion Peak
Recession Trough Industrial Production Increase Rapid increase
Decline Lowest Demand Increase Highest Decline Lowest Prices
Increase Rapid increase decline rapid decline Cost Increase Rapid
decrease Gradual decline Rapid decline Investment Increase High
Falls slowly Falls rapidly Employment Gradual increase Rapid
increase Falls Rapid falls Liberal Very liberal Falls Rapid
falls
13. A Bad Cycle Less Spending Fewer Goods Produced Fewer
Jobs
14. A Good Cycle More goods produced More jobs More
spending
15. 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.
16. 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.
17. 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 FISCAL POLICY
18. 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.
19. Recession Uncertain downfall. Controversies. Outcome-
Decline in profits, sales etc.
20. References Aggarwal. A, Goyal. R, Jhamb. S, Gaurav. S,
Karwa. A, & Rathi. R. (2012). Recesion in Japan& United
State:
http://www.slideshare.net/search/slideshow?searchfrom=header&q=Presentation+On+Recession+In+
Japan+%26+United+States.03 (March 2014) Bobby. A, Sharma. A,
Vineetha. K, Raghvandra. Y, Rohit. P& Vaibhav. J. (2010).
Business Cycles:
http://www.slideshare.net/SameerAlam/mrktng-b-group5-business-cycle?qid=dbcecc0b-eb11-4020-
b455-84c8c7d42ac9&v=default&b=&from_search=34. (05
March 2014) Akshbapna. D. (2014): Business cycles:
http://www.slideshare.net/dakshbapna/business-cycle-
31444513?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=qf1&b=&from_search=2.
06 March 2014. Becker. B, (2013). Corporate credit and Business
cycle: http://www.slideshare.net/GlobalUtmaning/bo-
becker?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=qf1&b=&from_search=8.
05 March 2014. Singla. H, (2012). Business Cycle:
http://www.slideshare.net/harshulsingla/business-
cycle1?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=default&b=&from_search=21.
05 March 2014.