The business cycle

business cycle

measured by changes in real gdp

sometimes we have long periods of growth

fluctuations caused by

economists try to figure out how well economy is doing

forecasting allows govt. to be aware

expansion period

upward trend in the business cycle

People are making more money. they generally use it to consume stuff... psychology big role here as well. positive economic news? more likely to spend

this leads to higher aggregate demand

prosperity cycle

so if we keep spending and buying stuff...

economy will peak

a few reasons for this...

durable goods (cars, appliances, homes)

when consumer wants are satisfied

businesses are competing for capital

interest rises

if demand shifts too right

when we have this dramatic shift

high inflation? people don't have as much money

now firms are overstocked with product

decreased incomes or none at all

revenue declines!

recession

heavily influenced by consumer psychology

depression

eventually turns around though!

some big ticket items have to be purchased

To hand in today

• exactly what your team is planning to sell
• as accurate of a raw materials list as possible
• marketing plan!
• how much you're charging / expected profit