Cambridge IGCSE Business (0264) syllabus reference: 6.1.1 and 6.1.2
Success criteria - by the end of this topic you can:
- describe the stages of the business cycle and their effects
- explain the effects of employment, inflation and growth
- explain the effects of changes in taxes, government spending and interest rates, and how businesses respond
The business cycle
| Stage | What happens | Likely effect on businesses |
|---|
| Growth | Output and incomes rising | Sales rise; businesses expand and recruit |
| Boom | Very high spending; inflation and skills shortages | Strong sales but rising costs |
| Recession | Output falls for at least six months; unemployment rises | Sales fall, especially luxuries; redundancies |
| Slump | Deep, long recession | Many businesses fail |
Key terms
Inflation - a general rise in prices across the economy.
Unemployment - people who want to work but cannot find a job.
Economic growth - an increase in the total output of an economy, measured by GDP.
Government policy