What factors affect the phases of a business cycle?
main factors contribute to changes in the business cycle: business decisions; interest rates; consumer expectations; and external issues. When businesses increase production, they increase aggregate supply and help fuel an expansion. When they decrease production, supply decreases and a contraction may result.
What are the six phases of the business cycle?
The business cycle consists of six phases: peak, recession, depression, trough, recovery, and expansion. What does the business cycle show? The business cycle shows how the real gross domestic product fluctuates over a period of time going through phases of output increases and decreases.
What are the two phases of the business cycle?
There are basically two important phases in a business cycle that are prosperity and depression. The other phases that are expansion, peak, trough and recovery are intermediary phases.
What are the four levels of inflation?
There are four main types of inflation, categorized by their speed. They are creeping, walking, galloping, and hyperinflation.
How do asymmetric information asymmetries in financial markets affect market behavior?
This paper develops a simple model of macroeconomic behavior which incorporates the impact of financial market “imperfections,” such as those generated by asymmetric information in financial markets. These information asymmetries may lead to breakdowns in markets, like that for equity, in which risks arm shared.
Do firms act risk-averse in imperfect markets?
In particular, we analyze firm behavior in the presence of equity rationing and imperfect futures markets, in which there are lags in production. Aft a consequence, firms act in a risk-averse manner. We trace out the macroeconomic consequences, and show that they are able to account for many of the widely observed aspects of actual business cycles.
How does the business cycle affect sector performance?
The business cycle can be a determinant of sector performance over the intermediate term. The phases of the economy provide a framework for sector allocation. For example, the consumer discretionary and industrials sectors tend to outperform in the early cycle.
What are the characteristics of a mid-cycle economy?
More credit and easy monetary policy aid rapid profit growth. Business inventories are low, and sales grow significantly. Mid cycle: Typically the longest phase with moderate growth. Economic activity gathers momentum, credit growth is strong, and profitability is healthy as monetary policy turns increasingly neutral.