Economic Cycle

• Economic Boom; the period of substantial economic growth in an economy overtime. Indicated by:

  • Wage increase, giving consumers more disposable income and a higher standard of living
  • Production increases to meet the increased consumer demand
  • Prices increase, leading to inflation as employers deal with higher wage demands
• Recession; the period where economic activity drops noticeably over a number of months. Indicated by:

  • A decrease in production
  • Falling employment levels, as workers are made redundant
  • Demand for goods fall as disposable income decreases
  • Government revenue decreases, leading to a fall on spending of public services
  • A low rate of inflation, as prices stay the same or fall
• Depression/Slump; a recession that lasts for a long period of time and causes a fall in economic activity. Indicated by:

  • Increasing unemployment
  • Fall in the demand of goods and services
  • Reduced consumer spending, as consumers decide to save in case if their situation gets worse
  • Inflation remains low
• Recovery; the period that usually occurs after a recession or depression. Indicated by:

  • An increase in consumer spending
  • Increased production in response to increased consumer demand
  • Falling unemployment
  • Inflation and interest rates stop falling but are low