economics

Business Cycle

Changes in economic activity over time

What are the four phases of the business cycle?

Expansion → Peak → Contraction (Recession) → Trough.

What happens during expansion?

GDP, employment, inflation and business confidence rise.

What happens during recession?

GDP, employment, inflation and business confidence fall.

GDP

The total value of goods and services produced in an economy.

Why is economic growth important?

Creates jobs, improves living standards and increases opportunities.

What is sustainable growth?

Growth that does not harm future generations.

What is one limitation of GDP?

It ignores volunteer work, housework and environmental impacts.

GDP per capita

GDP divided by population.

Why is GDP per capita useful?

It is a better measure of living standards than GDP alone.

What is the labour force?

People working or actively seeking work.

unemployed

Someone not working but actively looking for work.

What is frictional unemployment?

Unemployment between jobs.

What is structural unemployment?

Unemployment caused by a skills mismatch

What is cyclical unemployment?

Unemployment caused by economic downturns.

How do you calculate unemployment rate?

unemployed/ labour force x100

inflation

A general rise in prices over time

demand-pull inflation

Demand rises faster than supply.

cost-push inflation

Production costs increase, causing prices to rise.

How do businesses respond during a downturn

Cut costs, reduce staff and decrease production

How do businesses respond during an expansion

Invest more, hire staff and increase production.

Research and Development (R&D)

Investment in new ideas, technology and improvements.

product innovation

Creating new or improved products.

process innovation

Improving production methods.

Why is branding important

Builds loyalty, recognition and repeat purchases.