Stages of business cycle

1. Growth- When gdp is rising, low unemployement and high living standards.
2. Boom- Caused due to too much spending. Prices rise and shortage of skilled workers. High
business costs.
3. Recession- Too little spending. Gdp starts to fall. Fall of demand. Unemployment rises.
4. Slump- Long drawn out recession. High unemployment and prices fall. Many businesses fail
to survive.

A boom often leads to recession or slump.

Impact on business of changes in employment, inflation and GDP

1. Changes in employment level- Will affect the ability of companies to recruit employees.
Los of income causes decrease in demand except inferior good.
2. Rising inflation – This may result in increase of business cost. Fall in demand. Ppl have
less money left.
3. Increasing GDP – Means that the economy is growing .Increase in sales.

Inflation – Increase in average price level of goods and services.

Unemployement- When people who are willing to work are not able to find a job.

GDP – Total value of output of good and services in a country.

Economic growth – When a countries gdp increases

Balance of payement – Records difference between a countries export and import.

Government economic objectives-

1. Low inflation – They want this as (problems of rapid inflation)

- Inflation causes real income to fall
- Real income – Is the value in terms of what can be bought of an income
- Prices of good of foreign products is cheaper, causes unemployement in
country.
- Business wont expand
2. Low unemployment – Problems with unemployement
- Unemployed ppl don’t produce good
- Government pays unemployement fees
3. Economic growth- It is said to grow when gdp of a country increases
Problems with no eco growth
- Few workers are needed
- Standard of living decreases
 - Business wont expand as ppl have less income
4. Balance of payment-Difference between a countries export and import
- Price of a country’s currency against other currencies – exchange rate
Value of import>value of exports – trade depriations
Value of export> Trade of import – Trade value appreciations
Government economic policies
Fiscal policy
Income tax it's the tax on peoples income
increase in income tax = lower disposable income
reduces sales
profit tax is a tax on profit of business
businesses won't expand
people wont create business as government takes a lot of their income
indirect taxes
GST, VAT
Price of goods increase
Wages of employees decrease
Import tariffs and quotas

Monetary policy
Is the change in interest rate by the government or central bank
Supply side policy
Policies to make economy more efficient. Tries to increase competiveness of industry
Privatisation- aim to use profit as incentive
Improve training and education-
Increase competiveness reducing government control and monopolies