GDP

• What is GDP?

  The total measured value of economic activity in an economy, measured over a particular period.
• Business Cycle

  The business cycle is all about the rate of change in the value of economic activity. The most common measure of this activity is Gross Domestic Product (GDP)
• Business Cycle describes:

  -The changes in GDP from one quarter to the next

  -The traditional sequence of slump, recovery, boom and recession

  -The regular pattern of “ups and downs” in the economy
• Main Stages

  BOOM - High levels of consumer spending, business confidence, profits and investment. Prices and costs also tend to rise faster. Unemployment tends to be low

  RECESSION - Falling levels of consumer spending and confidence mean lower profits for businesses – which start to cut back on investment. Spare capacity increases + rising unemployment
• Main Stages

  SLUMP - Very weak consumer spending and business investment. Many business failures. Rapidly rising unemployment. Prices may start falling

  RECOVERY - Things start to get better. Consumers begin to increase spending. Businesses feel a little more confident and start to invest again but it takes time for unemployment to stop growing
• What Causes the Business Cycle?

  -Changes in the level of business and consumer confidence Alternating periods of stocking (businesses increasing their stocks) and de-stocking (reducing the value of stocks held)

  -Alternating periods of stocking (businesses increasing their stocks) and de-stocking (reducing the value of stocks held)

  -Changes in the value of consumer spending and business investment

  -Changes in government policy which can induce a change in the economy