People have employed terms such as “contraction,” “recession,” “downswing,” and “depression” to describe periods of low income, output, and employment. They have also used terms such as “growth,” “upswing,” and “prosperity” to describe periods of high income, output, and employment. The economic history of nations with free markets and capitalist economies demonstrates that periods of economic expansion or expansion are followed by periods of economic contraction or recession. The objectives of business cycle will be covered in-depth in this article, along with some examples for your convenience.
As a consequence, the Bureau uses the number of jobs, the level of personal income, the level of industrial output, and the level of industrial and commercial sales as indicators of the business cycle.According to an article published in the Library of Economics and Liberty by Christina D. Romer, the primary causes of business cycles are fluctuations in the labor market and variations in consumer spending. Read more about nature of business cycle subject to expand your perspectives.
Objectives of Business Cycle
According to the National Bureau of Economic Research (NBER), the purpose of monitoring business cycles is to examine the evolution of the forces that influence business in general over time. Keeping a watch on business cycles can teach you how markets and businesses interact, as well as how they behave and experience cycles.
You can evaluate business cycles at the geographic, state, and regional levels using data collected from across the country. This will help you comprehend how the business of a particular region is changing, allowing you to make any necessary adjustments. This page discusses objectives of business cycle in detail.
Be Prepared
Students will have a better comprehension of the business cycle, one of the most important tools in macroeconomics, after this lesson. Permit the students to utilize the Federal Reserve Bank of St. Louis’s FRED or project the website’s graph onto the board. Ask the children, “How do you believe the economy is doing at the moment?” and give them ample time to respond.
If they don’t answer or if you need to get them to speak, ask them, “Is the economy growing (going up) or shrinking (going down)?”Asking a follow-up question, such as “What do you believe is causing the economy to increase (or decrease)?” is another effective method to keep the conversation going.
Modeling
Start the business cycle slide presentation. Inform them that these are the key terms that will be utilized when discussing the business cycle. Explain to the children that a business cycle is simply a period of economic expansion and contraction, as measured by variations in the real GDP, also known as the Gross Domestic Product.
As you guide the students through the business cycle, discuss each phase with them. Give them sufficient time at each phase to record the information on the slide. Please elucidate the preceding statement: During the development phase of the business cycle, the gross domestic product (GDP) increases, unemployment falls, and inflation may rise.
During the contraction phase of the business cycle, GDP declines, unemployment rises, and inflation may remain stable or decline. Another objectives of business cycle is to evaluate the effectiveness of monetary and fiscal policies in stabilizing the economy during downturns.
Appropriate Economic Policies
A business cycle affects every aspect of a business field. Similarly, it will impact every aspect of the business. The stage of the business cycle influences all aspects of the business cycle, including demand, supply, and production costs. In light of this, the organization must be able to determine its current phase.
This will assist them in developing sound business and commerce regulations. For instance, if the business is expanding, now is the time to implement aggressive investment strategies or increase headcount. The objectives of business cycle include understanding the recurring fluctuations in economic activity.
Significantly Impact Cyclic Businesses
Changes in the industry affect all businesses, but not all in the same manner. When the phase of a business cycle shifts, it is more likely that certain types of businesses will collapse. These types of businesses must constantly monitor how the economy is changing. Other industries include the fashion industry, the electronics industry, the food and beverage industry, the real estate industry, etc.
When the economy is thriving, these types of enterprises must maximize their profits. Because a business downturn will affect them more than anyone else. Therefore, this is one of the most significant factors why work hours are so essential.
Market Entry and Exit
The phase of the business cycle at which a product enters the market is one of the most influential factors in determining its success. When the economy is sluggish and on the verge of a recession, it is much more difficult for a new product to succeed. The stages of the business cycle will even affect the price, distribution, and advertising of the new product.
If, on the other hand, a product is to be removed from the market, the decision’s rationale must be thoroughly examined. If the economy is emerging from a recession and beginning to develop again, it may take longer to recover. Consequently, the rise and fall of trade is also significant.
Strategic Management
The stage of a company’s business cycle will also have a significant impact on its business decisions. Managers and business proprietors frequently use the various phases of the trade cycle to make intelligent business decisions. In order for a business to succeed in the current market, it must constantly evolve.
As a result, the business will require distinct actions at various stages of the cycle. Therefore, if the company’s executives believe the economy is about to expand, they can decide whether to expand the business or produce more goods. But if the business is experiencing difficult times, expenditure must be reduced and rules must be adjusted accordingly.
Additionally, management could decide to discontinue certain product lines, either temporarily or permanently. The objectives of business cycle will play a significant role in such crucial business decisions.
Individual
Each student should receive a duplicate of the “Drawing a Business Cycle” assignment. Inform the students that they must complete the assignment and examine what they have been instructed. The assignment will be summarized by examining what the students wrote.
The responses will vary, but each image must depict all four phases of the business cycle. During a crisis, unemployment tends to increase, whereas it falls during a recovery. Another objectives of the business cycle is to analyze the causes and effects of changes in economic variables such as employment, production, and inflation.
Group Project
For the Business Cycle Activity, students should collaborate in pairs. Each student should receive two of each of the cards and answer page. Inform the students that you will read each statement aloud and then they will have one minute to discuss potential responses with their companion.
After selecting an answer, they must indicate it with an X and then present the corresponding card. Begin the activity by pausing after each statement to examine and discuss what the students have said. Ask the students if they have any queries regarding the business cycle once they have completed the assignment.
FAQ
How does the Economic Cycle Influence Decision-making?
When business leaders are aware of business trends, they can make better decisions. If they maintain their finger on the economy’s pulse and pay attention to current economic forecasts, they can anticipate economic contractions and capitalize on expansions.
Is the Business Cycle Critical to Economic Development?
A objectives of business cycle will impact every aspect of an organization. Similarly, it will impact every aspect of the business. The stage of the business cycle influences all aspects of the business cycle, including demand, supply, and production costs. In light of this, the organization must be able to determine its current phase.
Final Words
As previously stated, the most attention is paid to leading indicators, but according to the Conference Board, all three categories of indicators are significant when analyzing business cycles. Despite the fact that leading signals receive the most attention, this remains true.
According to the board, leading indicators are most useful when incorporated into a framework that also includes coincident and lagging indicators that help explain and describe changes in economic activity. Also included in this paradigm are leading indicators. In this post, we’ll examine the objectives of business cycle and grab extensive knowledge on the topics.
