During a BOOM demand will outstrip supply and prices will rise

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					During a BOOM demand will outstrip supply and prices will rise. Costs might
also increase as shortages in resources occur. With capacity running at or
near full levels, the need for new investment will be obvious and funds must
be set aside for this. Normally, business would expect to make high profits in
periods of boom within an economy.

Alas, booms do not last forever and a DOWNTURN usually follows. During
this period of the cycle the economy will experience an excess of stocks as
sales fall. Prices may have to fall to encourage consumers to keep spending.
Also, profit margins will be trimmed and investment funds may start to dry
up. Government might have thought that inflationary pressures were
increasing during the boom and so anti-inflationary policies will have been
introduced. These might have included an increase in interest rates and/or
increases in personal taxation. Both will have caused demand to fall.

 If the downturn gathers pace then the economy will fall into recession.
During a RECESSION the economy, and therefore much of business, will
experience a fall in output and profits. Indeed, losses might be recorded.
Some firms may go out of business and bankruptcies and liquidations will
increase. We would expect to see an increase in bad debts as firms struggle
to pay their bills. With confidence low, investment will fall and unemployment
will rise. Both will cause a further fall in business confidence.

As and when the RECOVERY starts we would expect to see the economy
show an upward movement in demand and a pick up in profits. This would
tease out more money for investment and that in turn would aid the
economic recovery. As business confidence grows so will employment and
that will build consumer confidence. People will start to buy and business will
supply. So, the cycle will have passed through one complete turn.
The Business Cycle



During a BOOM demand will . . . . . . . . . . supply and prices will . . . . . . ..
Costs might also . . . . . . . . as shortages in resources occur. With capacity
running at or near . . . . . . levels, the need for new investment will be
obvious and funds must be set aside for this. Normally, business would
expect to make . . . . . . . profits in periods of boom within an economy.



Alas, booms do not last . . . . . . . . . . and a DOWNTURN usually follows.
During this period of the cycle the economy will experience an . . . . . . . . . .
. . of stocks as sales . . . . . . . . . . Prices may have to fall to encourage
consumers to keep . . . . . . . . .. Also, profit margins will be . . . . . . . . . and
investment funds may start to dry up. Government might have thought that
inflationary pressures were increasing during the boom and so . . . . . . . . . .
. . . . . . . . . . policies will have been introduced. These might have included
an . . . . . . . . . . . in interest rates and/or . . . . . . . . . . . in personal
taxation. Both will have caused demand to . . . . . . . . . . .



 If the downturn gathers pace then the economy will fall into . . . . . . . . . . .
. .. During a RECESSION the economy, and therefore much of business, will
experience a . . . . . . . in output and profits. Indeed, losses might be
recorded. Some firms may go out of business and bankruptcies and
liquidations will . . . . . . . . . . We would expect to see an . . . . . . . . . . in
bad debts as firms struggle to pay their bills. With . . . . . . . . . . . . low,
investment will . . . . . . . . and unemployment will . . . . . . . . . . . . Both will
cause a further fall in business confidence.



As and when the RECOVERY starts we would expect to see the economy
show an . . . . . . . . . . . movement in demand and a pick up in . . . . . . . . .
. . . This would tease out more money for investment and that in turn would
aid the economic . . . . . . . . . . . . As business confidence grows so will . . . .
. . . . . . . and that will build consumer confidence. People will start to buy
and business will supply. So, the cycle will have passed through one
complete turn.

				
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