The Business Cycle Essay

The business cycle, it is also called economic cycle, are periodically and unstable levels in the economy that an economy has in different periods of time. Even though it was considered to be predictable and stable, it is now considered as unpredictable, and unstable that could vary in any time. The Business cycle will guide the businesses, industries, and companies to act in a specific way, depending in which of the 4 phases the business cycle is.

Since business cycle could be on the peak and then turn to be in recession, or it could be in recession and change to recovery, it will make each manager to determine what decision will lead their business in the market. The business Cycle has 4 different phases, which are Prosperity, Recession, Recovery, and Depression. Then it repeats continuously over and over. 1. – Prosperity, it is the phase when the economy passed from Recovery through Prosperity, which means that the economy is growing, and there is more demand in supplies and resources are enough to satisfied demand so that the economy expands.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

It also lead the economy to be on the peak, which means that there is enough jobs for employees, more capital, more entrepreneurial grow, and so on that will lead the economy in a good level or Boom Period. 2. -Recession, it is the phase when the economy passed from prosperity or Boom period to fall into Recession, which means that the market will be limited, demand falls, unemployment grows, and businesses will turn pessimistic so that they lose confidence.

All this make the economy falls and stay in a recession phase for a period of time. 3. -Depression, it is the phase when recession goes worse and fall deeper in the scale of the business cycle. It will lead the economy to continuously decrease their profits, jobs, market, investments, and so on, which make the GPN to fall and this lead to deflation. 4. -Recovery, it is when Depression has been passed to Recovery.

The economy starts growing again and outputs start increasing, investment increase, the businesses gain confidence to stay optimist, demand start growing, and profit start rising. It grows slowly until reach Prosperity. In conclusion, It will depend in what phase the Business cycle is in order to make a decision. If it is in a prosperity phase, Businesses have to start investing, and buying more resources that will make them gain more profits by the demand.

They also can pay for advertisement and market effort in order to get more market, because it will be on the peak of the cycle. But if the economy is in Depression, then businesses has to stay conservatively by not buying resources that wouldn’t’ be able to be sold, because they will not get profit; Therefore, they might reduce their cost in order to get profit, or at least to get the same amount that they spent buying them. Businesses will stay pessimist, but they could take risks if they are favorable.

x

Hi!
I'm Larry!

Would you like to get a custom essay? How about receiving a customized one?

Check it out