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Economic Factors - Coggle Diagram

- - - - Boom = the level of economic activity is rising rapidly, leading to higher inflation and increased imports. Wages may rise as businesses can afford to pay the additional costs. Prices may rise as shortages occur. (Government policies try to head off the worst excess of a boom. The reduction of growth in GDP is achieved by increasing interest rates and/ or increasing taxation and/ or cutting government expenditure).
      - Recession = economic activity declines as the economy moves into recession, with production rising less quickly, or declining, and unemployment increasing. Wages are likely to remain static and prices may fall to encourage consumers to purchase. Imports may fall as consumers do not have sufficient funds to purchase them and businesses do not need to purchase as many raw materials from overseas. (The government is likely to reduce interest rates or reduce taxes to encourage consumers to spend or it could increase public expenditure).
      - Slump = demand falls, unemployment is relatively high and there is low inflation. Businesses may have to reduce prices and they will be reluctant to invest. There will be spare capacity in the economy. (Interest rates are likely to be low, taxes may have been reduced and public expenditure increased).
      - Recovery = the rate of growth of GDP starts to increase, unemployment begins to fall as businesses take on more workers to cope with the rise in economic activity, inflation might start to increase as prices rise and businesses begin to increase their investment spending as business confidence increases. Imports are likely to increase. ( The government may raise interest rates to reduce inflation).
      - Firms supplying 'wants' may be affected significantly by the businesses cycle. Examples include wine, sports and leisure goods, restaurant meals, jewellery and household furniture. Firms supplying 'needs' are unlikely to be affected to a great extent by the business cycle - in fact, demand may rise for some of these products in a recession or slump: coal, bread, petrol, fresh vegetables and tobacco.