The Operation of an Economy - 3. Business Cycle

The Operation of an Economy-3. Business Cycle

• Business Cycle is the fluctuation in the level of economic growth due to domestic and/or international factors.

• Economic Growth is the increase in the monetary amount of goods and services produced in an economy of a given time (i.e. rise in GDP). It’s called an expansionary stage or Boom.

• Recession: 2 consecutive quarters (or 6 months) of negative economic growth. It is called a contractionary stage or Downturn.

• In Australia, we had 29 consecutive years of without experiencing a recession. COVID-19 has intervened the streak.

It is the government’s responsibilities to smooth the business cycle. Hence, in period of slow economic growth or recession, interventions (e.g. stimulus) are needed. E.g. Job Keepers.