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ECONOMIC CYCLE chapter 34 (What is the economic cycle, 1 BOOM, The four…
ECONOMIC CYCLE
chapter 34
What is the economic cycle
1 BOOM
The four stages
As an economy grows, it moves through four stages, this is known as the economic cycle
Recovery
Recession
Boom
Slump
The economic cycle describes the pattern of economic growth
The boom describes a period of above-average economic growth
The standard of living increases
More revenue is generated for the government due to high employment rates and increased consumer spending
Inflation starts to increase
2 RECESSION
The recession is a period in which economic growth falls below average. Also referred to as bust
Unemployment rates begin to rise
Consumer spending slows
More businesses fail
The government receives less income
Inflation decreases and may cause deflation
3 SLUMP
Unemployment rates are high
A slump occurs if a recession lasts for a long period of time. Economic growth is low and may even become negative
Inflation is low
consumer spending is low
4 RECOVERY
Inflation stops decreasing
Unemployment rates fall
An economy is in recovery when its economic growth begins to rise again
consumer spending rises