Exam 2: How Economic Issues Affect Business

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The Business cycle (also known as the economic cycles)is the periodic rise and fall that occurs in economies over time.30 these fluctuations are often measured using the real gross domestic product.Economists look at a number of types of cycles,from seasonal cycles that occur within a year to cycles that occur every 48 to 60 years.Economist Joseph Schumpeter identified the four phases of long-term business cycles as boom,recession,depression,recovery:
1.An economic boom brings jobs,growth,and economic prosperity.
2.Recession is two or more consecutive quarters of decline in the GDP.In a recession,prices fall,people purchase fewer products,and businesses fail.A recession has many negative consequences for an economy high unemployment,increased business failures,and an overall drop in living standards.
3.A depression is a severe recession usually accompanied by deflation.Business cycles rarely go through a depression phase.In fact,while there were many business cycles during the twentieth century,there was only one severe depression (in the 1930s).
4.A recovery occurs when the economy stabilizes and starts to grow.This eventually leads to an economic boom,starting the cycle all over again.