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Business Studies IGCSEPDF 178
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4. Slump
(Trough)
This is the lowest point of
the cycle when economic
activity is at its weakest.
Confidence among
businesses and
consumers is very low.
After a slump, the economy begins to show signs of improvement. This stage is called
Recovery.
Governments may take measures such as:
increase spending
on welfare benefits.
- Consumer goods
companies suffer
more as demand for
non-essential
products falls.
- GDP growth is at
its minimum or
negative.
- Unemployment
reaches extremely
high levels.
- Prices may fall
(deflation) as firms - Banks may be
- Many businesses
shut down because
of low sales and
cash flow.
- Surviving firms cut
costs drastically to
stay afloat.
struggle to attract
buyers.
- Business and
consumer
confidence are
both at their
lowest.
- Investment and
exports decline
sharply.
unwilling to lend
money, limiting
investment.
- Government
spending on
unemployment
benefits rises
sharply.
- Standard of living
falls for most of the
population.
Recovery Period