Unit 3

Business Cycles

Stages of business cycles.

Grammar: Future Tense.
Vocabulary: downturn, upturn, troughs, recession.

The business cycle is the periodic but irregular up-and down movement in economic activity,
measured by fluctuations in real gross domestic product (GDP) and other macroeconomic
variables. A business cycle is typically characterized by four phases – recession, recovery, growth,
and decline – that repeat themselves over time. Economists note, however, that complete
business cycles vary in length. The duration of business cycles can be anywhere from about two to
twelve years, with most cycles averaging six years in length. Some business analysts use the
business cycle model and terminology to study and explain fluctuations in business inventory and
other individual elements of corporate operations, but the term “business cycle” is still primarily
associated with larger (industry-wide, regional, national, or even international) business trends.

Stages of a Business Cycle

a) Recession

A recession-also sometimes referred to as a trough-is a period of reduced economic

activity in which levels of buying, selling, production, and employment typically diminish.
This is the most unwelcome stage of the business cycle for business owners and
consumers alike. A particularly severe recession is known as a depression.

b) Recovery

Also Known as an upturn, the recovery stage of the business cycle is the point at which the
economy “troughs” out and starts working its way up to better financial footing.

c) Growth

Economic growth is in essence a period of sustained expansion. Hallmarks of this part of

the business cycle include increased consumer confidence, which translates into higher
levels of business activity. Because the economy tends to operate at or near full capacity
during periods of prosperity, growth periods are generally accompanied by inflationary
pressures.

d) Decline

If refers to as a contraction or downturn, a decline basically marks the end of the period of
growth in the business cycle. Declines are characterized by decreased levels of consumer
purchases (especially of durable goods) and, subsequently, reduced production by
businesses.
 Factors that shape business cycles:
Internal:
o Consumption: When consumer spending increases, businesses will increase
production-causing them to hire more workers and purchase more materials and
capital goods. When consumer spending decreases, the opposite will occur.

o Business Investment: The purchasing of capital goods increases the number of

jobs in the economy because people have to make those goods. If investment
increases the economy will grow, if investment decreases the economy will
contract.

o Government activity: The government can influence the business cycle through
fiscal policy, that is, its tax and spend policies and monetary policies, that is, its
control of money supply through the Federal Reserve.

External:
o Inventions and Innovations: Major changes in technology can influence
the business cycle. Usually the technological changes move the economy
in a positive direction but this is not always so

o Wars and political events: The impact of such events on the economy is
very fact specific-in other words, difficult to generalize about.

Answer about the Business Cycle:

 What’s a business cycle?

 How long does a business cycle usually last?
 How is a business cycle measured?
 Name the stages of a business cycle.
 Which factors can influence a business cycle.

Look at the graph and write some sentences about the chocolate production between 2000-2005

The production starts with a boom………………………………………………………………………………………………..

 Future WILL: we use WILL when we refer to:
 a spontaneous decision, example: Wait, I will help you.
 an opinion, hope, uncertainty or assumption regarding the future, example: He
will probably come back tomorrow.
 a promise, example: I will not watch TV tonight.
 an action in the future that cannot be influenced, example: It will rain tomorrow.
 Conditional clauses type I, example: If I arrive late, I will call you.

Examples: Production will increase when consumer spending increases.

The economy will experience a downturn if industries reduce investment.

Imagine how the countries will be in 2050. Talk about the following topics:
Education, Banking, Health, Agriculture, and Transport.

Select the best alternative:

1. There has been a drop in sales. = Sales have (decreased, downed, increased)

2. Sales have increased for three years _________________. = Sales have increased for three
years in a row.(even, straight, forward)

3. You have to market these particular attributes. = You have to market these
particular.(qualifiers, qualifications, qualities)

4. Thanks to smart planning, we have __________________ another crisis. = Thanks to smart

planning, we have thwarted another crisis. (put forth, unveiled, averted).

5. The figures are down from January. = The _________________ are down from
January. (numbers, numerals, mathematics).

6. Our company has seen 10 years of uninterrupted growth. = Our company has seen 10
years of _________________ growth. (sporadic, steady, stagnant)

7. We should market this product as being durable and dependable. = We should market this
product as being _________________ and dependable. (study, sturdy, studious)

8. We need to develop a new strategy. = We need a new _________________. (appraisal,

approval, approach)
Read the company news below. Write The good news
is or The bad news is in front of them for next
semester.

profits will go up.

sales will go down.

fuel costs will decrease.

interest rates will experience an upturn.

the stock price will reach a peak.

deliveries will be on schedule.

construction will be ahead of schedule.

production will be behind schedule.

the shipment will be delayed.

the union is going on strike.

300 employees will be laid off.

revenue will be higher than predicted.

legal costs will be lower than forecast.

taxes will be lower than expected.

maintenance costs will be rocketed higher than
predicted.
the economy is heating up.
Use the words in the boxes and the charts to complete the cloze activities below:

rose dramatically
stabilized
maximum
minimum
increased slightly
slight dip
peaked
levelled off
fluctuated wildly

From week 1 to week 5, profits _______________________. Then from week 6 to week 8, profits
_______________________ and _______________________ at 3.0 million at week 8.From week 8
to week 15 profits _______________________ with a _______________________ at week
11.Then from week 15 to week 21 profits _______________________ with a
_______________________ of 3.5 million at week 16 and a _______________________ of 2.2
million at week 17. From week 21 to week 23, profits _______________________ at 2.8 million.