Economic Cycles And The Four Phases Of The Business Cycle

Another major element in how the economy performs is the business cycle. There are four phases in the business cycle: a peak, a recession, a trough, and then an expansion, where the cycle repeats. The peak is when the economy is at it’s greatest. There is full employment, output is at it’s highest capacity, and prices rise because demand rises as a result of increased income. Following a peak is a recession. A recession is characterised by at least two quarters of negative of decreased GDP growth. There is a decline in output, employment, and as a result decreased income. The decreased income causes consumers to spend less, which causes GDP to decrease even more. Eventually, the country will reach a trough, or depression. This is when the country
There are several things that can cause one of these phases slip into the next one, called a “shock”. One of these things are irregular innovation. There is a sudden technological boom- a huge change in technology, and then all it’s over. The only thing the economy can do is wait for the next technology boom. Once the technology boom happens, people spend a lot of money to get the newest, coolest technology, causing the economy to head toward a peak. Then once it isn 't the newest, coolest technology anymore, and the consumers are waiting for the next boom, they aren 't spending money, causing the economy to slip into a recession. Another major economic event that can cause the business cycle to change are political changes. In the event of a terrorist attack, people become scared. They do not want to go out, which in turn results in them not spending money, which sends the economy into a recession. But when there is a positive event, like a new peace treaty, or election, people are excited and go out and spend more
Trump’s presidency has already made major economic impacts. For example, the night he was elected global markets dropped a surprising amount. Currently, the Boeing stock market is dropping because Trump is deciding that he would rather use his own plane instead of taking a new Air Force One from the company. While there are currently negative impacts on the economy, his presidency could have a positive impact on the economy if he follows his plans. Donald Trump’s biggest vision for our country is to create a better economy that will create 25 million jobs. Trump plans on cutting taxes for the middle-class so they have more spending money. He also plans on bringing back our companies that have moved to other countries, bringing back hundred of jobs to the United States. He plans on doing that by reducing the taxes imposed. He plans on these tax cuts being paid for by reducing the amount of tax deductions available upper class people, along with reducing other loopholes. In conclusion, there are major economic factors that determine how fast and even if the economy will prosper. While microeconomics is important to the country, macroeconomics is just as, if not more important. Without looking at the economy as a whole, we will fail to see the the things that need to be worked on at the microeconomic level. If we failed to see that the country as a whole, had an unemployment level