reading 1 what causes the business cycle?
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The business cycle is caused by the forces of supply and demand—the movement of the gross domestic product GDP—the availability of capital, and expectations about the future. This cycle is generally separated into four distinct segments, expansion, peak, contraction, and trough.
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['Interest rates (the cost of borrowing)', 'Economic growth (changes in demand)', 'Confidence/expectations.', 'Technological developments (productivity of capital)', 'Availability of finance from banks.', 'Others (depreciation, wage costs, inflation, government policy)']
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Economic factors:- These are economic growth, interest rates, exchange rates and the inflation rate. These factors have influence on the operation and determination of businesses. For instance, interest rates affect the costs of exporting goods and the supply and price of imported goods in an economy.
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There are three basic reasons for the downward sloping aggregate demand curve. These are Pigou's wealth effect, Keynes's interest-rate effect, and Mundell-Fleming's exchange-rate effect.
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Business cycles are identified as having four distinct phases: peak, trough, contraction, and expansion. Business cycle fluctuations occur around a long-term growth trend and are usually measured by considering the growth rate of real gross domestic product.
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['cyclical unemployment (causes) -less personal consumption. ... ', 'frictional unemployment (causes) ... ', 'structural unemployment (definition) ... ', 'structural unemployment (causes) ... ', 'cyclical unemployment (definition) ... ', 'frictional unemployment (definition) ... ', 'seasonal unemployment (definition) ... ', 'seasonal unemployment (causes)']
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Scenario 1 implies production is being increased to meet increased demand. Higher production leads to a lower unemployment rate, further fueling demand. Increased wages lead to higher demand as consumers spend more freely. This leads to higher GDP combined with inflation.
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['The Money Supply. Inflation is primarily caused by an increase in the money supply that outpaces economic growth. ... ', 'The National Debt. ... ', 'Demand-Pull Effect. ... ', 'Cost-Push Effect. ... ', 'Exchange Rates.']
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What Is an Economic Recovery? Economic recovery is the business cycle stage following a recession that is characterized by a sustained period of improving business activity. Normally, during an economic recovery, gross domestic product (GDP) grows, incomes rise, and unemployment falls and as the economy rebounds.
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Economic recovery is the business cycle stage following a recession that is characterized by a sustained period of improving business activity. Normally, during an economic recovery, gross domestic product (GDP) grows, incomes rise, and unemployment falls and as the economy rebounds.
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What is the difference between business cycles and business fluctuations? A. Business cycles are changes in real GDP that occur on an irregular basis, and business fluctuations are systematic changes.
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The 1920s, known as the Roaring Twenties, was a time of many changes - sweeping economic, political, and social changes. There were many aspects to the economy of the 1920s that led to one of the most crucial causes of the Great Depression - the stock market crash of 1929.
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['A stock market peak occurred before the crash. ... ', 'The market – and the public – were overconfident. ... ', 'People bought stocks with easy credit. ... ', 'The government raised interest rates. ... ', 'After the crash, panic made a bad situation worse. ... ', 'There was no single cause for the turmoil.']
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['Classical. Minimum wage causes real wages to be above market clearing level leading to excess supply of labour.', 'Frictional unemployment. When workers are unemployed for short lengths of time between jobs.', 'Seasonal unemployment. ... ', 'Structural unemployment. ... ', 'Cyclical unemployment.']
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Furthermore, economic conditions are the sum total of many factors that can greatly affect a business. Such factors include GDP of the economy, per capita income, availability of capital, utilization of resources, state of the capital market, interest rates, unemployment levels, etc.
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How a Stock Market Crash Affects the Economy. Stock prices rise in the expansion phase of the business cycle. 2﻿ Since the stock market is a vote of confidence, a crash can devastate economic growth. Lower stock prices mean less wealth for businesses, pension funds, and individual investors.
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['#1. Stock Market Crash. -Throughout the 1920s, people invested in the stock market in hopes of making money. ... ', '#2. Banking Crisis. -People deposit money in banks for safe-keeping. ... ', '#3. Overproduction. -Industry thrived in the 1920s because of mass production. ... ', '#4. Under-consumption.']