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Business Studies IGCSEPDF 177
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2. Boom
(Peak)
3. Recession
(Contraction)
The economy starts to
slow down after a period
of strong growth.
Consumer confidence
declines and spending
falls, leading to lower
sales and profits.
The economy reaches its
highest point of activity.
Consumer spending and
production are at their
maximum, but excessive
demand often leads to
inflationary pressure.
- GDP begins to
fall for at least two
consecutive
quarters.
- Unemployment
starts to increase.
- Investment
decreases as firms
delay projects.
- Inflation may
slow or stabilise.
- Consumer
spending declines.
-
Firms
cut
production
to
reduce costs.
- Businesses may
lay off workers,
causing
unemployment to
rise.
- Smaller firms or
those
with
high
debts
may
go
bankrupt.
- Governments
collect less tax and
may need to
- GDP growth rate
is
very
high.
-
Inflation rises as
demand outpaces
supply.
- Production costs
rise due to higher
wages and raw
material prices.
- Profit margins may
fall despite high
- Labour shortages sales volumes.
appear and wages
increase.
- Interest rates
may rise as
governments try to - Inflation and
- Firms may face
difficulty hiring
skilled labour.
control inflation.
- Imports rise
because domestic
production can’t
meet all demand.
uncertainty can
make long-term
planning difficult.
- Businesses may
become cautious
about further
expansion.