An economic or business cycle depicts the overall state of the business, or the economy, while it undergoes the four phases in a cyclic pattern. The phases constitute contraction, expansion, trough, and peak in no specific order. During the expansion phase, the business’s revenue is on the rise while the levels of unemployment are declining (Hori, 2017). At the peak stage, this is where the business’s output stops increasing and decreasing starts. The contraction phase is where the business begins to experience an increase in unemployment as its output decreases (Hori, 2017). Lastly, the business reaches its turning point, where it hits the end of the recession period and starts increasing again.
Based on research, I found out that as the business moves out of recession, it can easily borrow money. It also becomes easy to establish or reestablish inventories, and consumers approach the business to more transactions (von Berg, 2020). The business can afford to employ new employees since it is experiencing a rise in its income. The impact I once experienced based on what happens at the expansion stage is that it became possible to access products at an affordable price. With a decline in inflation, it became possible to purchase more products at 150 dollars than it was at the peak phase of the economy. During the expansion phase, the government can utilize contractionary monetary policies via increasing rates with which interests are offered. The government should apply the same approach to monitor production since the economy is experiencing rapid growth (von Berg, 2020). Further, the improved policies should ensure slow down credit flow to cushion the economy against any possible build-up in inflation.
References
Hori H. (2017). Business cycle dynamics and stabilization policies: a Keynesian approach. Springer. Web.
von Berg S. (2020). The model business cycle: a dynamic and user-centric perspective on business model design and change. Cuvillier Verlag. Web.