6.1.1 Business Cycle

Question 1

what’s a bus cycle?

Answer 1

cyclical movement of econ growth characterised by recovery, boom, recession, slump

Question 2

5 factors of growth?

Answer 2

• sales increase
• employment increases
• small increases in production
• bus begins to consider investment
• growing bus confidence, tho some uncertainty

Question 3

what can prolong the recovery period and add to econ worries?

Answer 3

• bus uncertainty since them be reluctant to invest in new products/assets or employ new emps iff econ outlook is uncertain

Question 4

what’s the boom phase?

Answer 4

period of significant econ growth

what growth may result in

Question 5

7 characteristics of boom?

Answer 5

• high capacity utilisation (full use of bus facilities)
• low unemployment
• high demand levels (w/ increasing prices), particle leading to (inflation —> general price rises over time)
• wages increase due to labour shortages
• new bus start-ups increase
• sig bus investment & expansion
• high confidence 😎

Question 6

disadvantage of boom?

Answer 6

overconfidence & potential for subsequent downswing (fall) in growth

• overextend selves, borrowing heavily to finance growth & take unnecessary risks

—> investors demand $ back, suppliers offer less favourable credit
—> small fall in consumer/bus confidence quickly grows into recession (since faces w/ sudden diff econ situation)

Question 7

when is an econ in recession?

Answer 7

2 consecutive quarters of falling GDP (6months)

Question 8

6 characteristics of recession

Answer 8

• falling demand
• bus cuts output
• unemployment rises
• bus cuts back on investment
• increased bus closure 🙅🏻‍♀️
• fall in bus confidence 🙅🏻‍♀️😎

Question 9

4 bus responses in order to survive recession?

Answer 9

• stimulate demand
• minimise costs
• production
• investments

Question 10

3 things to stimulate demand?

Answer 10

• cut prices
• increase promo
• introduce special offer

Question 11

6 things to minimise costs?

Answer 11

• find cheaper RM
• reduces emp level
• introduce flexible working practices
• increase productivity
• stop unnecessary expenditure
• stop hiring new emps

Question 12

3 things to improve production?

Answer 12

• reduce spare capacity (sell assets)
• cancel overtime/reduce working week
• find cheaper production methods

Question 13

a way to improve investments (during recession)?

Answer 13

cancel planned investments

Question 14

what is the slump/ downturn?

Answer 14

represents lowest point of econ activity b4 recovery begins

Question 15

6 characteristics of slump/downturns?

Answer 15

• falling demand
• low production
• little, if anything bus investment
• high unemployment
• high bus no. closures
• low bus confidence

Question 16

impact of bus cycle on businesses?

Answer 16

• extent to which econ growth affects 1 bus depends on bus nature
• diff busses are affected in diff ways @ diff stages