This document contains a collection of presentations on business cycles. It defines a business cycle as having four phases: contraction, trough, expansion, and peak. These phases involve periodic rises and falls in economic activity measured by variables like GDP. Specific indicators are categorized as leading, coincident, or lagging. Causes of business cycles include aggregate demand, aggregate supply, and external factors like inventions, wars, and political events. Government uses fiscal and monetary policy tools to address recession and growth phases of the business cycle.

1. Business Cycles Presentation
This is the collection of different
presentations based on the Business
Cycles from Slide share.
Compiled by Sabelo Madise
Institution: University of Johannesburg

3. Business Cycle
• The business cycle is the periodic but irregular up-and-down
movements in economic activity, measured by fluctuations in real
GDP and other macroeconomic variables
• A business cycle is identified as a sequence of four phases:
– Contraction (A slowdown in the pace of economic
activity)
– Trough (The lower turning point of a business cycle,
where a contraction turns into an expansion)
– Expansion (A speedup in the pace of economic activity)
– Peak (The upper turning of a business cycle)

4. BUSINESS CYCLES
• Business Cycles -- Periodic rises and falls that occur in
economies over time.
• Four Phases of Long-Term Business Cycles:
1. Economic Boom
2. Recession – Two or more consecutive quarters of
decline in the GDP.
3. Depression – A severe recession.
4. Recovery – When the economy stabilizes and starts to
grow. This leads to an Economic Boom.
LG5
2-4

5. PHASES OF THE BUSINESS CYCLE
• Expansion/Growth: During this phase of
the business cycle, consumer and business
spending rise.
• Peak: After a period of growth, an
economy will reach a peak, where business
is producing at or near full capacity, and the
economy is at or near full employment.

6. Indicators of Business Cycles
There are variables other than real GDP that influence
the business cycle. They are classified into three:
(1) Leading Indicators: generally change before real
GDP changes.
Can be used to forecast future output.
(2) Coincident Indicators: tend to change at the same
time as real output changes
for example: as real output increases employment
and sales rise
Ref: MB p.136

7. Recession
Recession: This is a phase
when real GDP begins to
decline. Consumers and
business reduce their spending,
unemployment rises,
investment declines, and
pessimism about the economy
is likely to grow.

8. Trough/Depression
Trough/Depression: This is
the lowest point of the
business cycle. Factories will
be operating below capacity,
allowing unemployment to
reach high levels

9. Sources of Business cycle
• AGGREGATE DEMAND
• AGGREGATE SUPPLY
The degree to which real GDP declines or
increases depends on the amount by which AD
and AS curve shifts.

10. Business and a Boom
• A boom occurs when national output is rising
at a rate faster than the trend rate of growth
• It is characterised by HIGH consumer
spending, high business confidence,
investments and profits
• There is a lot more output.

11. A THOUGHT ON THE BUSINESS CYCLE
The business cycle tends to be self-
sustaining. In other words, when in a
period of growth, the economy will
continue to grow (jobs leading to jobs)
until some event (internal or external)
intercedes.

12. CAUSES OF BUSINESS CYCLES
External factors
1. Inventions and innovation: Major changes in
technology can influence the business cycle.
Usually technological changes move the
economy in a positive direction, but this is not
always so.
2. Wars and political events: The impact of such
events on the economy are very fact specific- in
other words, difficult to generalize about.

13. Features of Business Cycles
Variable Expansion Peak Recession Trough
Industrial Production Increase Rapid increase Decline Lowest
Demand Increase Highest Decline Lowest
Prices
Increase Rapid increase decline rapid decline
Cost
Increase Rapid decrease Gradual decline Rapid decline
Investment Increase High Falls slowly Falls rapidly
Employment Gradual increase Rapid increase Falls Rapid falls
Liberal Very liberal Falls Rapid falls

14. A Bad Cycle
Less
Spending
Fewer
Goods
Produced
Fewer
Jobs

15. A Good Cycle
More
goods
produced
More
jobs
More
spending

16. GOVERNMENT AND THE BUSINESS CYCLE
• In order to prevent the economy from
running too hot (inflation) or too cold
(recession/depression), the
government often becomes involved in
efforts to try and stabilize the
economy.
• The government has two major tools to try
and stabilize the economy and achieve its
goals: fiscal policy and monetary policy.

17. FISCAL POLICY
Fiscal policy is the taxing and spending
decisions that are made by the President
and Congress.
• Fiscal policy actions of the government
fall into two general categories:
1. Raise or Lower Taxes
2. Increase or Decrease Government
Spending.

18. During a Recession
The Government can
• Lower taxes and/or
• Increase spending
These actions boost the economy by putting
more money in the hands of people so they can
spend it.
This is called Expansionary Fiscal Policy
FISCAL POLICY

19. Growth Phase – Boom Phase
Launched in India in 1988
Consistent Growth.
Waves of optimism.
Highest point of Expansion.
Rise in profits, investment, sales,
employment etc.

20. Recession
Uncertain downfall.
Controversies.
Outcome- Decline in profits,
sales etc.

22. References
Aggarwal. A, Goyal. R, Jhamb. S, Gaurav. S, Karwa. A, & Rathi. R. (2012). Recesion in Japan& United
State:
http://www.slideshare.net/search/slideshow?searchfrom=header&q=Presentation+On+Recession+In+
Japan+%26+United+States.03 (March 2014)
Bobby. A, Sharma. A, Vineetha. K, Raghvandra. Y, Rohit. P& Vaibhav. J. (2010). Business Cycles:
http://www.slideshare.net/SameerAlam/mrktng-b-group5-business-cycle?qid=dbcecc0b-eb11-4020-
b455-84c8c7d42ac9&v=default&b=&from_search=34. (05 March 2014)
Akshbapna. D. (2014): Business cycles: http://www.slideshare.net/dakshbapna/business-cycle-
31444513?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=qf1&b=&from_search=2. 06 March 2014.
Becker. B, (2013). Corporate credit and Business cycle: http://www.slideshare.net/GlobalUtmaning/bo-
becker?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=qf1&b=&from_search=8. 05 March 2014.
Singla. H, (2012). Business Cycle: http://www.slideshare.net/harshulsingla/business-
cycle1?qid=123708e7-dd05-4886-b3f5-1ff309916edf&v=default&b=&from_search=21. 05 March
2014.