Effects of business cycles

To help slow the rate of inflation and stabilize currency value, the Federal Reserve Board might increase interest rates to discourage borrowing. When dramatic business cycles occur in different industries, it often affects the national economy as a whole and not just the industry experiencing the fluctuation.

effects of business cycle in macroeconomics

Please note that corrections may take a couple of weeks to filter through the various RePEc services. As a result the prosperity phase is marked by not only low levels of unemployment but also increases in average wages.

causes and effects of business cycle

During this period, economic output decreases. In October employment fell byjobs, and unemployment rate soared from 4. If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form.

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Explain the effect of business cycle

During periods of economic contraction, there is not enough currency circulating in the economy because consumer spending is down. Economic output is the total value of all goods and services produced in an economy. They lay off workers, buy less merchandise and postpone plans to expand. The prosperity phase of the business cycle is the most profitable for small businesses and consumers alike. Check Your Understanding Answer the question s below to see how well you understand the topics covered in this section. During the first quarter of , private household debt grew to There was proof in that the USA economy was slowing. The prosperity phase, also sometimes called the expansion phase, occurs when the economy is quickly growing. Recovery - This is the stage where businesses begin to improve a bit, firms hire a few more workers and increase their orders of materials from their suppliers. In October employment fell by , jobs, and unemployment rate soared from 4. Credit During the prosperity phase of the business cycle, it is easier for small businesses to obtain credit because banks are more willing to lend. During a recession business people spend less because sales are fail and businesses do what they can to reduce their spending. To encourage borrowing and increase consumer spending, the Federal Reserve Board might decrease interest rates. Bush resisted attempts to use fiscal policy to stimulate the economy.
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The Impact of Business Cycles on the Economy