Chapter 13, Problem 2AA

To determine

To ascertain: The way in which the business fluctuations can be predicted by using the following terms like business fluctuations, business cycle, boom, recession, depression, expansion, recovery, economic indicators, leading indicators, lagging indicators.

Explanation of Solution

Business fluctuations; For an enterprise, fluctuations in the commodity market can be highly difficult to manage. Consumer prices can fluctuate massively, which can devastate anyone who project income. That can also eat away the profit margins gradually and it can quickly become unprofitable for a smaller business.

The trade cycle is a tale of the economic booms and bust uncovered by the global economy. Business cycles are critical because they can affect profitability, and ultimately determine if a company is productive. In a boom period there is high levels of consumer purchasing, confidence in companies, extra earnings and expenditure, costs and price tend to rise more quickly, too. Unemployment remains small, as development creates new economic jobs. Spare capacity is increasing and unemployment is rising as businesses cut back and stockpile.

Recession: This means that it may be necessary to take some difficult decisions for the product, pricing, marketing campaigns, training, incentives and even new releases. While each company experiences a recession in unique ways, the most common challenges that companies face include temptation to reduce size of the production, quality and benefits or price hike

Depression is a prolonged, long-term decline in one or more economies of economic activity. It is a serious downturn of economy than a phase of recession that causes economic activity to slow during a normal cycle of business. Growth of economy means is a rise in the producing of goods and services over a given period. Economic growth generates more profit for enterprises. As a consequence stock prices are on the rise. This gives businesses the fund to occur and employ workers.

A Recession (decline in national income) may usually be characterized by high unemployment, lower real wages, increased inequality and increased government borrowing. The effect of a recession on the fact that it will last and how deep the performance is drops.

The important three indicators for the general stock market that are lead to rise in price, value of production produced domestically and labor market data. It also seek to notice where those three are in relation to the current economic cycle process.

A Leading indicator is an observable factor that changes until a specific pattern or trend starts to follow. Leading is used to forecast consumer changes but is not always accurate.

The lagging indicator is the measurement of output; accidents at the construction site indicates a lagging health

Economics Concept Introduction

Introduction: The business cycle defines the gross domestic product's downward and upward movement along its long-term trend. The time variation in business is the time span of a continuous sequence of boom and contraction.