Business cycle

There are 5 states in the business cycle.

 

Prosperity

-         Good economic times

-         The economy is doing well

-         Levels of employment are high

-         Workers are well paid

-         People spend money on goods and services

-         More tax are put into social programs

Inflation

-         Rise –over time- in the price of goods and services

-         Because people earn more money businesses are willing to supply more products

-         If wages do not increase the same amount, employees will not have the money to pay for goods and services

-         Then, supplies will loose money

Recession

-         The whole economy slows down

-         Business no longer creates as much wealth as it did during prosperity

-         It affects a large number of businesses at one time

-         Lay off employees

-         Consumers are reluctant to spend money

Depression

-         If a recession is severe or/and long, it may become a depression

-         Economy activity is very low

-         Unemployment very high

-         Many people loose his jobs and many companies go out

-         Demand for government services is very high

-         Drastic cuts must be done by the government

Recovery

-         The economy starts to improve

-         The fall in national income lessens

-         Manufactures slowly begin production again

-         Unemployment remains high, until businesses fell confident enough to hire more

-         After doing without for so long, people are interested in spending money again.

(Next step may be prosperity, to close the cycle)

This can explain the crisis that the world has had for last few years and continue nowadays.