Business cycle

• The business cycle describes the upturns and downturns in the level of a country’s economic activity (Gross Domestic Product or GDP) over time
•  recession occurs when an economy experiences two consecutive quarters (6 months) or more of negative economic growth
• A boom is defined as a period of time where an economy experiences increasing/high rates of economic growth
• recession- Increasing/high unemployment

  • Customers have less  disposable income  and are likely to reduce spending
• boom- Decreasing unemployment and increasing job vacancies

  • Customers’ disposable income increases leading to higher sales revenue
• Recession- Low confidence for firms/households

  • Businesses may delay spending decisions and focus on reducing risk and survival
  • Production levels are likely to be reduced
• • BOOM-High confidence and more risky decisions taken-
  • Businesses look to expand and maximise profit
  • Production levels are likely to be increased 
• Recession- Low inflation or deflation

  • Customers may postpone significant spending decisions leading to lower revenue
• BOOM-Increasing rate of inflation 

  • Interest rates are likely to rise and the higher cost of borrowing will increase the risk of capital investmen