Published on March 9, 2014
Grade 12 – Economics Unit 2
The economy has 4 stages in the business cycle
Fluctuations occur repeatedly as the economy experiences with the following turning points. • Peak This is the highest point in the upswing of a business cycle. This is generally through the expansion period PEAK • Trough TROUGH This is the lowest point in the downswing of an economy. This is generally through the recession period.
EXPANSION This is between when an economy comes out of a through and toward a peak. Economic recovery also known as a boom. RECESSION The contraction phase is when the cycle goes down from the peak of a cycle to the trough of an economy.
Features of a business cycle in expansion phase • The level of economic activity increases • More goods and services are produced as the output of the country increases(Demand ) • Levels of employment increases (More jobs) • Household expenditure increases(Income) • Interest rate decreases (Loans) • Rate of inflation Increases(Control spending)
Features of a business cycle in recessionary phase • The level of economic activity decrease • Fewer goods and services are produced(Demand decreases as no money) • Employment decreases (Not enough money to expand economy through jobs) • Spending declines(Income becomes less – expenses increase) • Interest rates increase(Loan repayments increase) • Rate of inflation decreases
Explanation for the business cycle. • Exogenous and “in”endogenous explanations. EXTERNAL – outside market system INTERNAL -Factors which originate in the market system Climate conditions(FLOODS) Changes in patterns of consumer spending Technical advances(loss of jobs) Changes in level of investments Unexpected events(Wars) Changes in what and how to produce. These are any of the above which will cause the economy to spend money or lose money
4 types of business cycles • Kitchin cycle Business cycles which last between 3-5 years and are caused by businesses adapting their inventory levels. (liquidity and liabilities) JOSEPH KITCHIN
• Kuznets cycles Business cycles which last between 15-20 years and are caused by the changes in building and construction industry. Think what Medupi and Kusile shafts are causing for our economy!!
• Jugler cycles Business cycles which last between 7-11 years and are caused by the changes in net investments by business and government.
Kondratief cycles Business cycle which usually lasts up to 50 years and longer and are caused by technological innovations, wars and discoveries of new resources. Think John D Rockefeller
The effects of this video on business cycles??? Click the following link: http://www.youtube.com/watch?v=mA63xWGPI-k OR http://video.search.yahoo.com/video/play?p=men+who+built+america&vid=4afe066d 76c320fbc3e917df4d1b5c1b&l=41%3A05&turl=http%3A%2F%2Fts4.mm.bing.net% 2Fth%3Fid%3DVN.607997580533500599%26pid%3D15.1&rurl=http%3A%2F%2Fw ww.dailymotion.com%2Fvideo%2Fx17joxr_1-6-the-men-who-builtamerica_shortfilms&tit=1_6+The+Men+Who+Built+America&c=7&sigr=12htif44c& sigt=10tct1hkm&ct=p&pstcat=politics&age=0&hsimp=yhsyhsifmclone1&hspart=Babylon&type=br112dm34bs01af121962&tt=b
COMPLETE ACTIVITY ON PAGE 36-37 IN YOUR TEXTBOOK
Reference list. J. Bantjes, M. M. (2013). The Business Cycle. In M. M. J. Bantjes, Focus Economics Grade 12 (pp. 22-30). Cape Town: Maskew Miller Longman.
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