Business Cycle Essay -- essays research papers

In everyday society, companies are affected by the economy. The company either suffers or benefits depending on what kind of economy it is. This will depend on what kind of company it is, and what kind of market the business does well in. The Business Cycle is what determines this factor. It is a term used in economics to designate changes in the economy. Timing of the business cycle is not predictable, but its phases seem to be. Many economists site four phases—prosperity, liquidation, depression, and recovery. During a period of prosperity, a rise in production leads to increases in employment, wages, and profits. Obstacles then begin to obstruct further expansion. Production costs can increase, helping create a rise in prices, and consumers buy less. Inventories accumulate, causing price declines. Manufacturers begin to diminish; workers are laid off. Such factors lead to a period of liquidation, and money is hoarded, not invested. Production cutbacks and factory shutdowns occur. Unemployment becomes widespread. A depression is in progress. Recovery may be initiated by a reawakening in consumer demand or government action to stimulate the economy. Prices rise more rapidly than costs. Employment increases, and people buy more. Investment expands. A new cycle is under way. (msnencarta.com) (http://www.keystone-web.com/buscycle.html) Business cycles do not always behave as neatly as the model just given, and no two cycles are alike. Apart from the traditional business cycl...