Business Cycles

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Recommended: Characteristics of the business environment

Business cycles affect all individuals within the population. Whether as part of the general public, consisting of customers and consumers, or as part of the world of business, from small local companies to large multi-national organisations.

Obviously, all governments aim for economic growth within societies, in order to achieve national progression. This can include various factors such as high levels of employment, investment and general business confidence. However, things do not always turn out as planned. For example, if economic growth slows down, this can have severe consequences, such as rising levels of unemployment, decreased consumer spending, and eventually bankruptcy of expendable businesses.

In this assignment, I will explain the nature, causes and implications of the business cycle, by addressing the four stages individually.

The theory of business cycles actually began a long time ago with the idea of “long waves” (Reijnders, 1990), and Kondratieff was one of the initial economists to enforce this principle. He believed that the ”duration of the long wave was 48-60 years”. Another economist, Kuznet, believed that as well as long waves , there were smaller cycles within this long period of time which were intermediaries between his extended long wave that lasted between 6 to 70 years. These periods in between were known as short term business cycles. Finally, it was obvious that the system of having short term business cycles was more accurate and efficient than other theories. They allowed for a more reliable prediction of future trends from previous data.

Theses cyclical movements were based upon the economic position of the population over certain time periods or until specific periodical ch...

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5) William Anderson (November 24th 2004), Why Business Cycle Theory

Matters [Online], Available from:http://www.mises.org/fullstory.aspx?Id=1664

6) Lakshman Chuthan and Anirvan Banerji (2004), Beating the Business Cycle [Online], Available from: http://www.randomhouse.com/doubleday/currency/catalog/display.pperl?isbn=9780385509534&view=excerpt

7) Worthington, I. and Britton, C. (2003), The Business Environment : The fourth edition, Pearson Education Ltd., Great Britain.

8) Zanny Minton Bedoes, The Great Thrift Shift, 22nd September 2005, Accessed on: Monday 6th March 2006, [Online] Available from: http://www.economist.com/surveys/displaystory.cfm?story_id=4418328

9) Samuel Brittan, Financial Times: Britain‘s delusion of Prosperity, 31/01/02 Accessed on: Monday 6th March 2006, [Online] Available from: http://www.samuelbrittan.co.uk/text105_p.html

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