Macro 7- The economic cycle

• Economic cycle Economic fluctuations between periods of expansion and contraction
• factors that impact the economic cycle GDP Interest rates Total employment Consumer spending
• Stage 1: Expansion rapid growth low interest rates Increased production increased employment wages business confidence output an AS increased in money supply leads to inflation
• Stage 2: Peak growth hits max rate prices and economic indicators stabilise for a short period of time imbalances in economy
• Stage 3: Contraction growth slows employment falls prices plateau demand falls oversaturated market leads to surplus supply- prices fall