Business Fluctuations (Causes and Indicators) Chapter 13 Sections 4 and 5 Business Fluctuations (Causes and Indicators)
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Causes of Business Fluctuations (AKA The Business Cycle) Four main forces – Business Investment/Decisions, Government Activity, External Factors, and Psychological Factors
Business Decisions Future Outlook – Things are going good they will spend more, create jobs. Things going bad, they will spend less, cut jobs. New Innovations – New inventions or production techniques.
Government Policies on taxing and spending money (Fiscal Policy) Controlling the money supply (Monetary Policy)
External Factors Examples… Wars Availability of raw materials
Psychological Reactions Panic (Ex. 9/11, this recent recession)
Economic Indicators Economic statistics that measure the economy
Leading Indicators Stats that may show what will happen in the economy (Major Indicators/Important)
Coincident Indicators Changes that occur at the same time as the change in the business cycle.
Lagging Indicators Seem to happen later on in the business cycle. Typically gives a clue as to the duration (length) of the phase.