The Business And Market Cycle Essay

The Business And Market Cycle Essay

Length: 725 words (2.1 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

The Answer to Question 1:
According to what is said in Macroeconomics, the business/market cycle is comprised of a series of short-term alternations between the upturns and downturns in an economy. When an economy is booming it is considered to be at an expansionary, or recovery, period. During an expansionary period, employment and production will increase. However, when an economy is considered to be deteriorating, it is called a contraction, or a recession. During a recessionary period, employment and production significantly decrease. The period between a recession and a recovery period (going from a recession to a recovery period) is identified as a business cycle trough. The period in which an economy goes from an expansionary period to a contractionary period is identified as a business cycle peak. [1]

The Answer to Question 2:
According to Austrian Economics, the primary causes of an economic boom are the decreases in the interest rates followed by a large increase in credit creation. During a booming period, banks are offering a large quantity of loans, while businesses are taking advantage of the lowered interest rates by heavily investing in capital. Businesses quickly begin to invest in malinvests and overproduce assuming that they have enough capital to produce their goods. In addition, the businesses think that consumers are actively purchasing and consuming their goods at the same rate that they are producing the goods. [2] Due to the boom in capital goods, and the increase in production, consumers are tricked into thinking that they have increased incomes. The consumers continuously purchase goods using loans and credit, with the belief that their future incomes will cover the expenses. Banks begin to realize th...


... middle of paper ...


...ve solution to prevent another downturn would be for the government to proactively plan and put into effect well-timed fiscal and monetary policies. The government should slowly begin to raise the interest rate and slightly alter the money supply (i.e. do anything to slim down future excessive activities from banks and firms). This should, hopefully, cause banks to slow down their credit creation and stop any firm from overproducing or investing in bad projects. If a bank or firm begins to fail, I don’t think they should be helped, unless they are absolutely needed to prevent a further downfall in the economy. This should decrease the incentive for banks and firms to purposely fail because they’ll know they won’t be bailed out by the government. I believe the government should learn from its mistakes, expect past events to occur again, and to effectively plan ahead.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Macroeconomics : A Market Cycle Essay

- 1.) According to the Macroeconomics textbook, a market cycle is a sequence of cycles of economic expansion and contraction. The first phase of the market cycle is the contraction stage where the economy begins to decline because of the reduction of productivity and employment, in other words a recession occurs. At this point, the economy is at a trough which means that it is at its lowest point. Once the economy experiences a recession and begins to expand, it falls under the recovery stage, which means it’s having a normal upward trend....   [tags: Inflation, Unemployment, Business cycle]

Better Essays
706 words (2 pages)

Business Cycle in Theory Essay

- The business cycle is a non-repeating cycle from expansion to recession of business activity that takes place around a rising trend that illustrates vast variety. Part of the business cycle consists of recessions, which begins when investment slows and recessions turn into expansions when investment increases (). From 1929 – 1933 the GDP fell 30% and the economy entered the Great Depression that lasted until WWII. Since 1945 there have been 10 recessions. In some ways the 1990’s were like the 1920’s, consisting of rapid economic growth and unprecedented prosperity ()....   [tags: Business Management ]

Better Essays
851 words (2.4 pages)

Preparation For Propulsion Of Market Cycle And Trading Exchange Essay

- INTRODUCTION We could say that planning is one of the most important preparations for propulsion of market cycle and trading exchange. To be able to make a successful marketing activities, every business should plan ahead all their future steps-location, partners, customer’s segmentation. Marketing research, sales planning and also following promotional activities are playing the major role in increasing companies` selling production, services and respectively higher revenues. If heads of the companies want to overcome the difficulties and challenges encountered normally in the presentation of each new product or service, they should research very thoroughly and carefully that industry and p...   [tags: Marketing, Sales, Sales promotion]

Better Essays
1596 words (4.6 pages)

Essay on Coca Cola - Growth, Employment, Business Cycle And Inflation

- Introduction Fiscal Policy affects The Coca-Cola Company as it does many other businesses. The four components of Fiscal Policy are employment, growth, business cycle and inflation. The following discusses the different aspects of Fiscal Policy as related to The Coca-Cola Company. Employment One of the Coca-Cola Company’s strongest strengths lies in its ability to conduct business on a global scale while maintaining a local approach, one of the most intelligent strategies thought up by the human resource department of Coca-Cola....   [tags: Business Analysis Management Strategy]

Better Essays
1218 words (3.5 pages)

Business Cycle Essay

- 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....   [tags: essays research papers]

Better Essays
811 words (2.3 pages)

The Real Business Cycle Theory Essay

- Introduction The Real Business Cycle theory was first initiated by Kydland and Prescott in 1982, which concentrate on explaining the economic fluctuations driven by the “real” exogenous technology shocks. It described the general philosophy of any New Classical approach to business cycle analysis. This essay is going to explore their main successes and drawbacks by firstly providing an overview of the historical background of the model. Then it will discuss some general achievements, extensions to, and criticisms before concluding....   [tags: Macroeconomics, Keynesian economics]

Better Essays
1495 words (4.3 pages)

Identifying a Target Market Essay

- Introduction This report will provide a market target analysis of Hanndia Pest Control Service Pty Ltd. Hanndia Pest Control Services, specialise in working with real estate agencies to manage white ant infestation of rental properties, by applying an environmentally friendly fumigation barrier. The main office is located in the Brisbane City council suburb of Calamvale, South Eastern Queensland, with a total of 20 employees. This includes the manager, field officers and administrative support. The purpose of this report is to identify the market target for Hanndia Pest Control Services....   [tags: Business Analysis Market]

Free Essays
1764 words (5 pages)

Causes of Recessions and Business Cycles Essay

- For module five case assignment, we will define what a recession is and indicate whether we think another one is on the horizon. I will explain why I think a recession may be near. I will also explain what factors in the economy will have the biggest impact on the business cycle. Finally, I will discuss whether I think the business cycle is dead. During the periods of September 2001 to November 2001 the U.S. experienced a terrible time in our country for our economy; it was a recession. Even though it was only for a short period of time and it wasn’t as bad as it sounds, there were people who got laid off from work, that suffered a decrease in personal income, and that felt the effects of th...   [tags: Business Cycle Economy]

Free Essays
1197 words (3.4 pages)

Hayeks Contribution to the Business Cycle Essay examples

- Hayeks Contribution to the Business Cycle Friedirch August von Hayek was born in Vienna on May 8, 1899 and died on March 23, 1992, in the city of Freiburg in Breisgan in Germany. Hayek was a central figure in 20th-century economics and he represented the Austrian tradition. After Hayek served military service, he became a student at the University of Vienna where he got his doctorate in law and political science. In 1923-4, Hayek visited New York and then returned to Vienna where he continued his work....   [tags: essays papers]

Better Essays
1864 words (5.3 pages)

Mexico Business Cycle Essay

- Mexico’s Business Cycle The term business cycle or economic cycle refers to the fluctuations of economic activity around its long-term growth trend. It involves shifts over time between periods of relatively rapid growth of output-recovery and prosperity, and periods of relative stagnation or decline- contraction or recession. These fluctuations are often measured using real gdp. Despite being termed cycles, these fluctuations in economic growth and decline do not follow a purely mechanical or predictable periodic pattern....   [tags: Mexico Economics]

Free Essays
1239 words (3.5 pages)