Thursday, August 6, 2009

How do the following vary during the business cycle: inflation, unemployment rate, and inventory lev

i shouldn%26#039;t be doing your homewok for you, but since I%26#039;m bored i%26#039;ll help!



The 4 stages of the business cycle:



1) Early recovery(the upturn)- the economy begins to recover and growth in actual output resumes.



2)Full recovery (Expansion )-there is rapid economic growth( boom). Unemployment starts to decline by a fuller use of resources eg; human capital %26amp; machinery.People are employed and making money.Higher demands for goods and services exceeds supply.( firm inventory declines).This demand fuels a rise in prices, or inflation.



3) Early recession(peaking out)-growth slows down. When prices get too high, consumers decide goods are too expensive and demand decreases. When demand decreases, companies lay off workers because they don%26#039;t need to make as many goods or provide as much services.The economy enters a recession.



4) Full recession( the slump)-there is neglible growth in the economy due to lowered demand. (high/accumulated inventory)Firms will cut prices to spur demand. As demand picks up, people begin buying again, fueling the need for greater supply. And the cycle goes back to the beginning.

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