The Business Cycle

Flashcards on the key concepts of The Business Cycle, including the phases of Boom, Contraction, Trough, and Expansion.

What does the Business Cycle refer to?

The changes or fluctuations in economic activity that occur over time.

What happens during a Boom in the Economic Cycle?

Spending and production are increasing, incomes and profits are at their highest, unemployment is at its lowest, leading to worker shortages and high inflation.

What characterizes a Contraction phase in the Economic Cycle?

Decreasing consumer spending, falling production levels, decreased wage rates, increasing unemployment, and falling consumer and business confidence.

What occurs at the Trough or Recession phase of the Economic Cycle?

Income and production are at their lowest, unemployment is at its highest, there may be job losses, declining business profits, and an increase in bankruptcies.

What defines a Recession?

A recession is when the rate of economic growth is negative for two consecutive quarters.

What happens during the Expansion phase of the Economic Cycle?

Government policies encourage economic growth, confidence improves, spending and investment increase, production rises, and unemployment decreases.

How do government interventions affect the Business Cycle?

During a boom, the government may intervene to slow down economic activity, leading to a contraction.

What are some signs that an economy is in a Boom phase?

High levels of spending, production, incomes, and profits; low unemployment; and high inflation rates.

Why might businesses refrain from investing during a Trough?

Businesses may have unused resources and face declining profits, leading to a lack of new investment.

In the context of the Business Cycle, what is confidence?

Consumer and business confidence refer to the optimism about the economic future, which affects spending and investment.