Economic Cycles

“Change is the only thing that is constant”

-Heraclitus

Economies cycle between expansions and contractions naturally. These changes are due to employment levels, interest rates, supply and demand, etc. There are four stages in the cyclic pattern: expansion, peak, contraction and trough. Expansion is when GPD is increasing and unemployment is decreasing. The peak is a turning point in which output begins to decrease. Contraction or recession is defined as output decreasing and unemployment increasing. The trough is where recession ends and output begins increasing again. We can dive a little deeper into the characteristics each of these.

1. Expansion:

   1. Rapid growth

   2. Low interest rates

   3. Increased production

   4. Steady flow of money through economy

   5. Cost of money cheap

2. Peak:

   1. Growth hits max rate

   2. GPD spending at highest level

3. Contraction

   1. Employment falls

   2. Prices stagnate

   3. Surplus supply

   4. Lowering prices

4. Trough/recession:

   1. Stagnated spending

   2. Stagnated income

   3. Credit hard to attain

   4. Low business sales

   5. Caused by:

      1. Shock or unexpected event or time

      2. Government intervention

      3. Time

These cyclical patterns are part of the economy. It’s important to understand them if you’re in any type of business. The economy will directly affect your brand.