The+Business+Cycle

=The business cycle (trade cycle)=



A Boom is ...a period of prosperity (people are perceived to be better off)

 * Output of goods rises
 * Demand increases
 * Employment levels increase
 * Wages and prices go up
 * Businesses boom

A Slump is when...

 * Output falls
 * Unemployment rises
 * Wages and prices fall
 * Prosperity decreases
 * Businesses struggle to survive (some fold and cease to exist)

Businesses favour boom periods, because profits rise as they sell more. However, as the boom reaches its peak, costs can rise. At the top of the boom it is more difficult to recruit and wages and costs rise. Businesses become cautious in the downturn in the cycle and make cutbacks, such as downsizing labouror postponing purchases of machinery.