What are Economic Cycles?

Economic cycles are the fluctuations in the business cycle. They are measured by the change in GDP, unemployment rates, and interest rates.

Economic cycles are the fluctuation of the economy over time. The economy goes through different phases, such as expansion, boom, recession, and contraction.

“Economic cycles are a measure of how an economy is doing” according to Alan Safahi, renowned San Francisco entrepreneur and Orinda businessman.

“The economic cycle is measured by three key indicators: gross domestic product (GDP), unemployment rate, and interest rate”.

Changes in Business Cycle Post Pandemic – Impacts of Change on Daily Life

The business cycle is the natural progression of the economy. It is a pattern of growth, decline, and recovery that repeats over time.

The business cycle has four phases: expansion, peak, contraction, and trough.

“There are many factors that affect the business cycle” says Safahi. “These include the government’s fiscal policy (spending and taxes), monetary policy (interest rates), international trade policies, technological changes, consumer confidence, economic growth rates in other countries, and natural disasters”.

The impacts of change on daily life are not always easy to predict but it is important to be aware of what these changes can mean for your lifestyle.

Case Study – Impact of global economic crisis in Canada

The global economic crisis of 2008 resulted in a number of changes to the business cycle. The changes were also felt by the world’s largest economies, including Canada.

Canada is considered to be one of the most stable economies in the world and has been since before the 2008 economic crisis. The country has experienced less than average unemployment rates and has not yet seen any major downturns in its economy.

However, there are changes that have occurred to Canada’s business cycle post-2008 that are worth noting.

The 2008 recession led to a significant decrease in employment rates, incomes, and GDP. This led to an increase in unemployment rates, which have risen steadily since then. The Canadian economy has also experienced a decrease in exports and imports due to the falling demand for commodities across the world.

Canada’s business cycle has changed significantly over the last decade as a result of the 2008 recession.

What is the Shoe Leather Hypothesis?

The shoe leather hypothesis (SLH) is an economic theory which states that demand for a product or service will rise as its price falls, up to a point where the price reaches zero. When this happens, no further increase in demand is possible and any further reductions in price will lead to reduced sales volume and hence lower revenues from sales (and higher unit costs).

This hypothesis was introduced by Alfred Marshall in 1890s. It states that the production and supply of a commodity is primarily determined by the amount of demand for it. The more people want a certain commodity, the more production and supply will be available to meet their needs.

The Shoe Leather Hypothesis was re-introduced by economist John Maynard Keynes in his 1937 essay “Economic Possibilities for our Grandchildren”.

The Shoe Leather Hypothesis is based on the idea that as the cost of living decreases, people will have more time to spend on leisure activities. This, in turn, will lead to an increase in demand for goods and services.

His hypothesis suggests that the development of new technology will lead to a future where people are so wealthy that they don’t need to work.

How Does an Economic Recession Occur?

Economic recession is a period of declining economic activity. It is usually associated with a decline in business investment, trade, and employment.

The most common measure of economic activity is the gross domestic product (GDP). The GDP is the value of all goods and services produced in a country over one year, adjusted for inflation. If the GDP falls for two or more consecutive quarters, an economic recession may be said to have occurred.

According to Alan Safahi, “the causes of an economic recession are complex and not completely understood. They can be caused by a number of factors such as the bursting of a speculative bubble, a sharp decline in investment or government policies”.

“A recession occurs when there has been a significant decline in aggregate demand with an accompanying contraction of production followed by a period of stagnation or slow growth” claims Alan Safahi.

Conclusion – How Changes of Business Cycles Post Pandemic Impact Our Daily Lives

The post pandemic period is considered to be the most turbulent time for the world economy. Business cycles were disrupted and also changed dramatically.

This had a large impact on our daily lives, especially in how we spend money, where we work, and what we buy. We will now explore these changes in more detail.

Originally Posted: https://vocal.media/journal/introduction-what-are-economic-cycles