Business Cycle

Vocabulary
upturn (upswing, period of expansion)–підйом (поліпшення економічного становища)
downturn (downswing, period of contraction) - економічний спад (спад виробництва)
consumption (of something) – споживання будь-чого
slump - різке падіння цін(попиту або ділової активності)
to exceed demand – перевищувати попит
to intervene in (smth) – втручатися у щось
government spending - державні витрати
contraction - зниження ділової активності
recovery - пожвавлення ділової активності (після падіння)
boom- швидкий економічний підйом
deflation- дефляція(ситуація при якій падають ціни на товари, падають обсяги виробництва і
торгівлі, скорочується рівень зайнятості населення).
restriction- обмеження
trough - нижча точка циклу (найглибша точка падіння виробництва)

The business cycle describes the phases of growth and decline in an

economy. The goal of economic policy is to keep the economy in a healthy growth
rate – fast enough to create jobs for
everyone who wants one, but slow
enough to avoid inflation. Unfortunately,
life is not so simple. Many factors can
cause an economy to be out of control, or
settle into depression. The most
important, over-riding factor
(определяющий) is confidence of investors, consumers, businesses and
politicians. The economy grows when there is confidence in the future and in
policymakers, and does the opposite when confidence drops.
There are four stages that describe the business cycle. At any point in time you are
in one of these stages:
1. Contraction - When the economy starts slowing down.
2. Trough - When the economy hits bottom, usually in a recession.
3. Expansion - When the economy starts growing again.
4. Peak - When the economy is in a state of exuberance (изобилие)
What Causes the Business Cycle?
 The business cycle is affected by all the forces of supply and demand. When
consumers are confident, they buy now knowing there will be income in the future
from better jobs, higher homes values and increasing stock prices. Even a little
healthy inflation can trigger demand by spurring shoppers to buy now before prices
go up. As demand increases, businesses hire new workers, which further stimulates
more demand. This is the Expansion phase.
If demand outstrips supply, then the economy can overheat. It's still the
Expansion phase, but if demand isn't cooled down with higher taxes (fiscal policy)
or higher interest rates (monetary policy), then the Peak is not far off.
In the Contraction phase, confidence is replaced by fear or even panic.
Consumers sell their homes, and stop buying. Businesses lay off workers, and
hoard cash. In addition to demand, the business cycle is also heavily dependent on
the availability of capital. This is known as liquidity, and is itself dependent upon
interest rates. A trough usually is accompanied by a recession and a bear market,
while an expansion is usually signaled by a bull market and inflation.

Questions of UNIT 5
1. What is the goal of economic policy?
2. What stages of business cycle are there?
3. What is the peculiarity of contraction stage?
4. What is the role of expansion stage?
5. What happens ifdemand outstrips supply on expansion
stage?
6. What forces is business cycle affected by?
7. What is over-riding factor of business cycle?
8. What causes the business cycle?
Quiz
1) Listed in order, the phases of a complete business cycle are
    contraction, recession, depression, expansion.
  contraction, trough, expansion, peak.
  expansion, contraction, trough, peak.
  trough, expansion, boom, bust.
2) The low point in the business cycle is referred to as the
  trough.
  depression.
  recession.
  contraction.
3) Which of the following macroeconomic variables could not be used as a leading
economic indicator?
  Employment
  Inventoryinvestment
  Residentialinvestment
  Stockprices
4) One negative aspect of a business cycle boom is
  a reduction in government budget deficits.
  a declining rate of unemployment.
  a declining rate of inventory investment.
  an increasing rate of inflation.
5) Which of the following is associated with peaks in the business cycle?
Relatively high levels of unemployment.
Recessions.
Relatively low levels of unemployment.
Both a. and b. above.
6) The best time in a business cycle is
a) Inflation
b) Deflation
c) Recovery
d) Prosperity
7) After a deflation which will occur?
a) Prosperity
b) Recession
c) Deflation
d) recovery