Chapter 6 - Understanding business cycles. This chapter describe the business cycle and its phases; describe the typical patterns of resource use fluctuation, housing sector activity, and external trade sector activity, as an economy moves through the business cycle; describe theories of the business cycle;. | Chapter 6 Understanding business cycles Presenter’s name Presenter’s title dd Month yyyy Introduction The study of business cycles is the study of short-term economic fluctuations. Factors that may affect business cycles are some of the same factors that affect economic growth (., labor productivity, money supply, inflation, and technology). Copyright © 2014 CFA Institute 2 Overview of the business cycle A business cycle consists of an expansionary period and a contractionary period. Characteristics of a business cycle: They are typical in economies that rely on business enterprises. There are alternating phases of expansion and contraction. Phases occur throughout the economy, most often simultaneously. Phases reoccur, but vary in duration and intensity. An expansion occurs after a low point (the trough) and a contraction occurs after the highest point (the peak). A contraction is also referred to as a recession. is referred to as a depression if severe and if aggregate activity . | Chapter 6 Understanding business cycles Presenter’s name Presenter’s title dd Month yyyy Introduction The study of business cycles is the study of short-term economic fluctuations. Factors that may affect business cycles are some of the same factors that affect economic growth (., labor productivity, money supply, inflation, and technology). Copyright © 2014 CFA Institute 2 Overview of the business cycle A business cycle consists of an expansionary period and a contractionary period. Characteristics of a business cycle: They are typical in economies that rely on business enterprises. There are alternating phases of expansion and contraction. Phases occur throughout the economy, most often simultaneously. Phases reoccur, but vary in duration and intensity. An expansion occurs after a low point (the trough) and a contraction occurs after the highest point (the peak). A contraction is also referred to as a recession. is referred to as a depression if severe and if aggregate activity declines. Copyright © 2014 CFA Institute 3 LOS: Describe the business cycle and its phases. Pages 280–284 A business cycle consists of an expansionary period and a contractionary period. An expansion (or boom) occurs after a low point (the trough), and a contraction occurs after the highest point (the peak). A contraction (or recession) is referred to as a depression if severe and if aggregate activity declines. The business cycle can be described in terms of capital spending inventory levels, consumer behavior, housing sector behavior, and external trade. 3 Typical scenario: recession Copyright © 2014 CFA Institute 4 LOS: Describe the typical patterns of resource use fluctuation, housing sector activity, and external trade sector activity, as an economy moves through the business cycle. Pages 280–284 In a recession aggregate demand declines, inventories begin to accumulate, companies slow production, and companies cut nonessential expenditures. These actions result in a lower GDP. 4 .
