What causes business cycles?

ECONOMIC STABILITY AND BUSINESS CYCLES

When people speak of business cycles, they think of things like «prosperity» and «depression.» «Prosperity» is ordinarily used to describe an extended period of high employment, an improved standard of living and stable prices.

By contrast, «depression» refers to an extended period of general underemployment of our economic resources. Factories are idle, millions of workers are unable to find jobs, and the rate of business failure is high. The worst depression in American history, now known as the Great Depression, lasted from 1930 to 1940. There were, for example, 13 million people, about one of every four workers, unemployed in 1933. That same year businesses failed at a record rate, and numbers of people lost their savings because more than 4,000 privately owned banks closed permanently.

ЭКОНОМИЧЕСКАЯ УСТОЙЧИВОСТЬ И ЦИКЛЫ деловой активности.

Когда люди говорят о циклах деловой активности, они думают о таких вещах как "процветание" и "упадок (кризис)." "Процветание" обычно используют, чтобы описать расширенный период высокой занятости, улучшенный жизненный уровень и стабильные цены.

Наоборот, "кризис" имеет отношение к расширенному периоду общей неполной занятости наших экономических ресурсов. Заводы стоят, миллионы рабочих не в состоянии найти рабочие места, и показатель неудачных сделок высокий. Наихудший кризис в истории Америки, сейчас известный как Великая Депрессия, продолжался с 1930 на 1940. Были, например, 13 миллион людей, 1 на каждого из 4 рабочих, безработных в 1933. В тот же год рекордное количество предприятий потерпели неудачу, и многие люди потеряли свои сбережения поскольку более 4,000 частных банков закрылись навсегда.

More common, however, are much shorter and less dramatic changes in business activity. These changes can be described in a number of different ways, but for convenience they are called the periods of boom, contraction, recession and expansion. The way to smooth out economic fluctuations was not found yet.

Чаще, тем не менее, происходят значительно более короткие и менее драматичные изменения в деловой деятельности. Эти изменения могут быть описаны различными способами, но для удобства, они названы периодами бума, сжатия, спада и расширения. Способ сгладить экономические колебания пока не найден.

Boom

At the peak of the business cycle the economy is booming. Business is producing at or near capacity, and those looking for work can generally find jobs. During peak times, business investment and consumer spending are at very high levels. But because the economy is at or near full employment and the demand for goods and services is increasing, prices are also increasing. This sets the stage for the next phase of the business cycle.

Бум

На пике делового цикла экономика грохочет. Бизнес производит в полную или почти полную мощность, и те, кто ищет работу, могут обычно найти рабочие места. На пике развития, деловая инвестиция и потребительский расход - на очень высоких уровнях. Но поскольку экономика - в или около полной занятости и спрос на товары и услуги возрастает, цены также возрастают. Это устанавливает этап для следующей фазы делового цикла.

Contraction

For any number of reasons, consumers and businesses begin to reduce their spending levels. Businesses may lay off workers, reduce their purchases of raw materials and reduce production because they have built up excess inventories. Some businesses may decide to continue to use old factories and equipment rather than investing in new machines and buildings. Some businesses and consumers will even reduce spending because economists predict that business will be slowing down in the next few months. Whatever the reason, reductions in business and consumer spending mark the beginning of a contraction in the business cycle.

With the reduction in spending, other business firms begin to cut back their activities. Their production is reduced and more workers are laid off. Because of the layoffs, workers, who are also consumers, spend less. This leads to still more reductions in production and additional worker layoffs.

Сжатие

Для любого количества причин, потребители и предприятия начинают уменьшать уровни их расходов. Предприятия могут увольнять рабочих, уменьшать закупки сырья и уменьшать производство поскольку они создали избыточные материально-производственные запасы. Некоторые предприятия могут решить продолжать использовать старые заводы и оборудование, а не инвестировать в новое оборудование и здания. Некоторые предприятия и потребители даже уменьшат расход поскольку экономисты предсказывают, который дело (бизнес) будет замедлен в течение следующих нескольких месяцев. Независимо от того какая причина, уменьшения в деловом и потребительском расходе говорят о начале сжатия в деловом цикле.

С уменьшением в расходе, другие деловые фирмы начинают сокращать их деятельность. Их производство уменьшено и больше рабочих уволены. Из-за увольнений, рабочих, которые - также потребители, истратьтесь меньше. Это лидирует, чтобы все еще больше уменьшений в промышленных и дополнительных увольнениях рабочего.

Recession

With factories operating at less than capacity and unemployment at very high levels, total output of goods and services enters a long-term decline. This is the bottom phase of the business cycle, or as economists describe it, the period of recession.

Times are hard during recessions. Unemployment is very high, jobs are difficult to find and many businesses fail. A very severe and long-lasting recession is called a «depression.»

Expansion

After a period of recession the economy eventually begins to recover, entering the expansion phase of the business cycle. During a period of expansion the conditions are about to improve, business begins to expand its activities. Unemployment declines as additional workers are hired. This, in turn, leads to higher levels of consumer spending and still further expansion of employment, output and consumption.

WHAT CAUSES BUSINESS CYCLES?

For many years economists struggled to find a theory that would explain all business cycles.

In explaining business cycle fluctuations, today's economists often distinguish between external and internal events. External events are those outside the economic system that explain fluctuations in the business cycle. Internal events are those occurring within the economy itself.

External Causes

External factors affect the economy because of population changes, inventions and innovations, and other significant political and social events.

Population changes. Changes in population affect the demand for goods and services. Population increases can lead to increased production and employment levels that trigger expansion and boom. Population decreases are likely to have the opposite effect.

Inventions and innovations. Major changes in technology, such as the development of the automobile, the airplane and the computer, have led to bursts of business activity and investment. This, in turn, was followed by increased employment opportunities and a period of expansion and boom.

Internal causes

Internal causes of fluctuations are factors within the economy likely to start an expansion or contraction of the business cycle. Three of these internal factors have to do with consumption, business investment, and government activity.

Consumption

Business firms try to provide consumers with the goods and services they want. When consumer spending is on the increase, business firms hire additional help and increase their level of production. As production, employment and sales increase, the business cycle enters a period of expansion and boom. When consumer spending decreases, the opposite occurs. Production is reduced, workers are laid off, and he economy enters a period of contraction and recession.

Business investment

Investment in capital goods like plant, tools and equipment, creates additional jobs, thereby increasing consumer purchasing power. The increase in spending generated by the initial increase in investment leads to still further investment, consumption and total production. When investment decreases, the opposite occurs and the economy enters a period of contraction.

Government activity

Governmental policies can give the business cycle an upward or downward nudge. Government does this in two ways. One is through the use of its power to tax and spend. The other is by regulating the supply of money and credit in circulation. Economists describe government's ability to tax and spend as its fiscal powers, and its ability to regulate the supply of money and credit as its monetary powers.

Спад

С завод операционный в менее чем возможности и безработице на очень высоких уровнях, общем выходе товаров и вводов услуг долгосрочный спад. Это - нижняя фаза делового цикла, или как экономисты описывают это, период спада.

Время жесткое в течение спадов. Безработица очень высокая, рабочие места трудны оказываться и много предприятий терпят неудачу. Тот же серьезный и продолжительный спад назван "депрессия."

Расширение

После того, как период спада экономика в конечном счете начнет восстанавливаться, вступление фазы расширения делового цикла. В течение периода расширения, условия собираются улучшаться, дело (бизнес) начинает расширять свою деятельность. Безработица отклоняется так как дополнительные рабочие наняты. Это, в свою очередь, концы на более высокие уровни потребительского расхода и все еще дальнейшего расширения занятости, выхода и потребления.