Marketing 1 THE BUSINESS CYCLE An Economic Concept

What is it? The cycle of economic growth and decline of a given economy There are FOUR stages: Expansion Recession Depression Recovery 2

Expansion Flourishing Economy Consumers have a hopeful outlook about business and the economy Good time to start a business Period of prosperity Low unemployment Increase in output of goods and services Higher consumer spending peak Expansion continues until it reaches a peak This peak signifies the end of the expansion and the beginning of a recession 3

Recession Economic Slowdown  Lasts at least 6 months  Significant decline in economic activity  Companies reduce workforce  Consumers have less money to spend trough Recession ends once an economy reaches its trough (lowest point) and then begins to rise 4

Depression Prolonged Recession Becomes nearly impossible to find a job Many businesses are forced to shut down Consumer spending is very low Unemployment is very high Production of goods and services is down Many people cannot afford to meet their basic needs 5

Recovery Renewed Economic Growth This is where the cycle begins again Business picks up People start to find jobs Demand for goods and services increases 6

The Business Cycle 7 Expansion Recession Depression Recovery Peak Trough