Economic Cycle

   Economic Cycle:

·         Boom: Economic growth is well above average. Consumer spending is high and people are more confident and unemployment is falling or is low. Investment from businesses is high. As a result of all of this inflation is likely to rise.

·         Recession: Economic growth will start to fall below the average growth rate. This is when growth has been negative for the last two consecutive quarters. Investment is likely to fall and inflation is likely to fall. Imports will begin to decline and consumer spending will lower.

·         Slump: Growth is slow or negative. Consumer spending will be low and could actually be falling where consumer spending is lower than in earlier time periods. This is likely to be because consumers feel pessimistic and insecure about their jobs and the chances of keeping their jobs in the future. Inflation is likely to be low. Businesses attempt to encourage more spending. Imports are likely to be low in growth or even falling. Balance of payments moves into surplus, where exports exceed imports.

·         Recovery: Economic growth will start to rise towards the average level again. If economic growth has been negative, it will start to reach positive rates again. Confidence will return to customers and businesses. Consumer spending will start to rise again and businesses will begin investing again. Unemployment is likely to stop rising and may not even begin to fall, although the level of unemployment may still be high. Inflation will also stop falling.