The Business Cycle | Business Studies for GCSE/IGCSE - Year 11 PDF Download

• Unemployment rates are intricately tied to the fluctuations in the business cycle.

Unemployment and the Business Cycle

 The Impact on Business of Changes in Inflation

• Inflation signifies a continuous surge in prices within an economy over time.
• A price index in most nations monitors monthly price changes of a spectrum of goods and services, comparing them with earlier periods.
• Recent years have witnessed a substantial rise in inflation across Europe, notably in the UK where inflation peaked at over 11% in 2022 due to heightened fuel expenses. By late 2023, Eurozone inflation had moderated to 2.9%.
• Elevated or unstable inflation rates can pose significant challenges for businesses.

Problems Caused by Rising or Fluctuating Inflation

The Impact on Business of Changes in Gross Domestic Product (GDP)

• GDP increases are indicative of growth and boom phases.
  • While inflation may escalate, augmented household incomes might offset heightened expenses.
  • Challenges in recruiting and retaining workers may prompt businesses to seek labor importation from abroad.
  • Although interest rates are likely to be elevated, heightened consumer confidence may sustain robust spending on high-value items.
• A decline in GDP is synonymous with recession and slump periods.
  • Despite subdued inflation, household incomes will be under pressure, prompting cautious or reduced discretionary spending.
  • Governments may implement measures to stimulate the economy, potentially resulting in enhanced public services, infrastructure development, or tax benefits for businesses.
  • Businesses could capitalize on low-cost borrowing opportunities stemming from reduced interest rates and invest in future business expansion.