There are 5 states in the business cycle.
Prosperity
-
Good
economic times
-
The
economy is doing well
-
Levels
of employment are high
-
Workers
are well paid
-
People
spend money on goods and services
-
More
tax are put into social programs
Inflation
-
Rise
–over time- in the price of goods and services
-
Because
people earn more money businesses are willing to supply more products
-
If
wages do not increase the same amount, employees will not have the money to pay
for goods and services
-
Then,
supplies will loose money
Recession
-
The
whole economy slows down
-
Business
no longer creates as much wealth as it did during prosperity
-
It
affects a large number of businesses at one time
-
Lay
off employees
-
Consumers
are reluctant to spend money
Depression
-
If a
recession is severe or/and long, it may become a depression
-
Economy
activity is very low
-
Unemployment
very high
-
Many
people loose his jobs and many companies go out
-
Demand
for government services is very high
-
Drastic
cuts must be done by the government
Recovery
-
The
economy starts to improve
-
The
fall in national income lessens
-
Manufactures
slowly begin production again
-
Unemployment
remains high, until businesses fell confident enough to hire more
-
After
doing without for so long, people are interested in spending money again.
(Next
step may be prosperity, to close the cycle)
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