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Business Cycle Essay Sample

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Business Cycle Essay Sample

Boom: – during the boom stage of the business cycle the economy is performing its best. Demand, production and sales figures are high. To meet the high levels of demand and production the business has to create new jobs; by doing this the percentage of the nation has money to spend on goods and services. However as businesses produce greater profits higher wages can be paid to employees growing their disposable income. People& businesses in the economy are allowed to spend money as there is a great business available for them.

Recession: – customers continue to spend but overall load fall and product services become more costly. As a result to this businesses are strained to reduce the prices of their items to generate sales. The reduced output also causes people to lose their jobs, and in some cases this can cause economic failure as the business cannot continue to exist in the reduced economy.

Slump: – throughout slump, confidence in the economy is at its lowest. The production is low and the demand for work continues to fall. Even those that are working may be forced to take a salary drops due to the cut costs in the corporation. Businesses continue to fail as profits and investments are low due to a lack of disposable income, towards the end of the slump period yet, confidence slowly starts to arrival.

Recovery: – when a business enters the recovery stage the business begins to spend and throwaway income slowly begins to rise, fresh businesses go into the market as the economy starts to produce.

GDP (Gross Domestic Product)
The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period – you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year. http://www.investopedia.com/ask/answers/199.asp#ixzz2Cwxg3x8P

INTEREST RATE
Interest rates remove some of the profits that are made in businesses that make loans to operate. Interest rates also make less money available to people that are paying of houses resulting in their not purchasing as much from businesses. This also flows on to renters of homes. The higher the rates the lower the economic activity. http://wiki.answers.com/Q/How_do_interest_rates_affect_businesses

INFLATION
If the business don’t raise the prices on whatever product they sell alongside the inflation it will end up paying higher and higher prices on materials and services from other companies meaning lower and lower revenue. The general increase in prices in an economy. Interest rates remove some of the profits that are made in businesses that make loans to operate. Interest rates also make less money available to people that are paying of houses resulting in their not purchasing as much from businesses. This also flows on to renters of homes. The higher the rates the lower the economic activity. http://wiki.answers.com/Q/How_do_interest_rates_affect_businesses#ixzz2CwywLgxZ

UK’s GDP: Widened to 5.2 million up from £1.9million in the first gross domestic product (GDP) in the UK expanded 1.00 percent in the third quarter of 2012 over the previous quarter. Historically from 1955 until 2012 the united kingdom GDP growth rate averaged 0.62 percent reaching an all time high of 5.30 percent in march in 1973 and a record low of -2.50 percent in June of 1958. The gross domestic product growth rate provides an aggregated measure of changes in value of the goods and services produced by an economy. The United Kingdom is among the world’s most developed economies. Services particularly banking, insurance, and business services account by far for the largest proportion of GDP while industry continues to decline in importance.

Over the past two decades, the government has greatly reduced public ownership and contained the growth of social welfare programmes. China’s GDP: the gross domestic product (GDP) in china was worth 7298.10 billion US dollars in 2011 according to a report published by the World Bank, the GDP value of china is roughly equivalent to 11.77 percent of the world economy. Historically, from 1960 until 2011, china GDP averaged to 963.58 billion USD in December of 2011 and a record low of 46.46 billion USD in December of 1962. The gross domestic product is equal to the total expenditures for all final goods and services

Inflation: the rate of inflation in the UK slowed last month, the consumer price index (CPI) fell to 2.2% in September from 2.5% in August. The inflation rate in the united kingdom is reported by the UK office for national statistics. Historically, from 1989 until 2012 the united kingdom inflation rate averaged to 2.8 percent reaching an all time high of 8.5 percent in April of 1991 and a record low of 0.5 percent in may of 2000. in the United Kingdom, the most important categories in the consumer price index are transport (16.2 percent of the total weight) and housing, water, electricity, gas and other fuels (14.4 percent). Recreation and culture accounts for 13.4 percent, restaurants and hotels for 11.4 percent and food and non alcoholic beverages for 11.2 percent. The index also includes; miscellaneous goods and services at 9.6 percent; clothing and footwear at 6.5 percent; furniture, household equipment and maintenance at 6.1 percent.

Alcoholic beverages and tobacco health, communication and education account for the remaining 11.2 percent of total weight. Inflation (china) the rate of inflation in China rises in November. Inflation in China accelerated in november, as economic growth picked up and food prices rose. Chinese consumers paid 2% more for good and services in november then they did a year ago, the government’s national bureau statistics reported on a Sunday. While that up from a 1.7% annual increase in october, it nevertheless represents tame inflation for the world’s second largest economy. A year ago the country was experiencing an annual inflation rate at 4%. the Chinese government prefers to keep its annual inflation rate below 4%- a level it seems as consistent with health economic growth and consumer demand.

The inflation rate averaged 4.23 percent reaching an all time high of 27.70 percent in october of 1994 and a record low of -2.20 percent in march of 1999. in china the most important components of the CPI basket are food at 31.8 percent of total weight and residence at 17.2 percent. Recreation, education and culture articles account for 13.8 percent; transportation and communication for 10 percent, healthcare and personal articles at 9.6 percent, clothing at 8.5 percent; household facilities, articles and services for 5.6 percent; tobacco liquor and articles for the remaining 3.5 percent. The CPI basket is reviewed every five years on the basis of household surveys. Revisions reflect new spending patterns and economic development, according to the nation bureau of statistics.

Interest rates (UK): historically, from 1971 until 2012, the united kingdom interest rate averaged to 8.26 percent reaching an all time high of 17 percent in December of 1979 and a record low of 0.50 percent in march 2009. in the united kingdom the bank of England has operational independence. Decisions on interest rates are taken by the monetary policy committee (MPC). The bank of england official interest rate in the repo rate. This repo rate applies to open market operations of the bank of england with a with a group of counterparties (banks, buildings, societies, securities and firms). interest rate (china): the benchmark interest rate in china was last recorded at 6 percent. Interest rate in china is reported by the people’s bank of china, historically from 1996 until 2012, china interest rate averaged 6.5 percent reaching an all time high of 11.0 percent in may of 1996 and a record low of 5.3 percent in august of 2010. in china the interest rates decisions are taken by the peoples bank of china monetary policy committee.

The PBC administers two different benchmark interest rates: one year lending and one year deposit rate unemployment rate (UK): unemployment rate in the united kingdom remained unchanged at 7.80 percent in october of 2012 from 7.80 percent in September of 2012. unemployment rate in the united kingdom is reported by the UK office for for national statistics. Historically, from 1971 until 2012 the united kingdom unemployment rate averaged 7.25 percent reaching an all time high of 12 percent in February of 1984 and a record low of 3.40 percent in November of 1973. in the united kingdom, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force. Unemployment rate (china): unemployment rate in china remained unchanged at 4.10 percent in the third quarter of 2012 from 4.10 percent in the second quarter of 2012. unemployment rate in china is reported by the ministry of human resources and social security of the PRC. Historically, from 2002 until 2012, china unemployment rate averaged 4.2 percent reaching an all time high at 4.3 percent in December of 2003 and a record low of 3.9 percent in September of 2002. in china, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

GDP (UK): the gross domestic product (GDP) in the united kingdom expanded 1 percent in the third quarter of 2012 over the previous quarter. GDP growth rate in the united kingdom is reported by the UK office for national statistics. Historically, from 1955 until 2012 the united kingdom GDP growth rate averaged 0.6 percent reaching an all time high of 5.3 percent in march of 1973 and a record low of -2.5 percent in June of 1958. the united kingdom is the worlds seventh largest economy. Like in the case of many other developed nations, services is the most important sector of the economy and accounts for more than 75 percent of total GDP. The key segments within services are distribution, transport, hotels &restaurants. (18 percent of total GDP), government, health and education(20 percent); professional and support (11percent); financial and insurance (9 percent) and real estate (9 percent). Although the united kingdom is still one of the biggest manufacturers in the world, production constitutes only 10 percent of the GDP.

Last big component of the GDP is construction which accounts for around 7 percent of total output. GDP (China): the gross domestic product (GDP) in china expanded 2.20 percent in the third quarter of 2012 over the previous quarter. GDP growth rate in china is reported by the national bureau of statistics of china. Historically, from 2011 until 2012, china GDP growth rate averaged to 2.1 percent reaching an all time high of 2.5 percent in June of 2011 and a record low of 1.5 percent in march of 2012. in china the growth rate in GDP measures the change in the seasonally adjusted value of the goods and services produced by Chinese economy during the quarter. China’s economy is the second largest in the world after the united states, during the past 30 years china’s economy has changed from a centrally planned system that was largely closed to international trade to a more market-oriented that has a rapidly growing private sector. A major component supporting china’s rapid economic growth has been exports growth.

UK Balance Of Payments: the united kingdom recorded a trade deficit of 3644. GDP million in October of 2012. balance of trade in the united kingdom is reported by the UK Office for national statistics. Historically, from 1955 until 2012. the united kingdom balance of trade averaged -1193.47 GBP million reaching an all time high of 2946 GBP million in march 1981 and a record low of -6067 GBP million in august of 2005. the united kingdom is the world’s fifth largest trading nation, highly dependent on foreign trade. It must import almost all its copper, ferrous metals, lead, zinc, rubber and raw cotton and about one-third of its food. The united kingdom’s exports manufactured items like telecommunications equipment, automobiles, automatic data processing equipment, medicinal and pharmaceutical products and aircraft. Its main trading partners are European union countries, the united states, china and Japan.

UK economy this is the graph of UK economy.

The UK economy emerged from recession in the three months from July to September, helped by the Olympic Games. The UK economy grew by 1.0% according to the GDP figures which measures the value of everything produced in the country, the office for national statistics said that the Olympics ticket sales had added on 0.2 percentage points to these figures. After 1992 the UK economy and average household incomes enjoyed a period of unbroken growth, in 2008 the global financial crisis plunged the UK into its longest and deepest recession since comparable records began in the 1950’s. More than a million people lost their jobs as businesses from shops to manufacturers and banks have either ended or lay off staff. Consumer spending had been rising in the years leading up the crisis thanks to buoyant housing market and cheap and easy credit.

But the credit crunch and job fears meant consumers cut spending, deciding to pay off the debt and save instead. The fall in demand at home and from abroad, hit businesses. They also found that borrowing from banks which mostly relies on was harder and much more expensive. The period started since the start of financial crises and has been categorised by short bursts of growth and contraction in what the bank of England has been described as a ‘’zigzag’’ path to recovery. Others talk of the economy ‘’flat lining’’ in previous recessions recovery was well under way by this stage, four years since the start of the downtown.

How does the UK Economy affect Tesco?
Tesco is the biggest retailer is expected to report its first fall in group profits in 1994 due to the slump in sales in the UK and the cost of turnaround plan to half that decline. David McCarthy, analyst at Investec, said UK food retailers are ‘facing the worst conditions in memory’ as that the industry is in ‘structural decline as trade transfers from highly profitable large stores to less profitable channels, i.e. the internet and convenience’ he also said that it could be time for Tesco to undergo a ‘major overhaul of strategy’. He added ‘maybe it is time to do better things then just do things better.’ The recession has affected Tesco as the sales this Christmas went down by 2.3% in the UK but the company as a whole is growing because it is expanding internationally.

China’s economy.
This is the graph of China’s Economy.
The Chinese economy, in a state of autarky since the days of Mao Zedong experienced some radical transformations after Deng Xiaoping took over in 1978. From being an excessively centrally planned economy it matured to a more open economy for the past ten years. Driven by rapid economic growth and rising incomes, the standard of living has risen and consumer goods such as cars and television sets which were once more reserved for the elite are now within the grasp of the common man. Between 1978 and 2002, the amount of good passing through Chinese ports had increased tenfold and the number of foreign visitors to the country had crossed over a million.

China the fourth largest country in terms of size after Russia, Canada and the USA is now in the world’s second largest economy after the USA of adjusted for differences in cost of living (purchasing power parity differencing) although it is only about 10% of the US economy in dollar terms. Tremendous comparative advantage in terms of cheap labour and low production costs has given Chinese goods an edge over others in the worlds markets. Data for the past three years reveal that the country has been maintaining a high growth rate in the GDP, GNI as well as the per capita GDP reaching a high of around $1700 in 2005 has been continually maintained throughout the year 2006.

How is Toyota being affected by China’s Economy?
Toyota motor Corp. Saw its sales in China fall by half in September compared to August, according to sources, as tensions between Japan and China flared over the East China Sea’s disputed islands and anti-Japan demonstrators took to the streets. as the Chinese market account for about 10 percent of Toyota’s global sales, the rapid loss of business is a significant blow to the firm. Anti Japan rallies began in mid-September after the Japanese government put the ‘’senkaku islands’’ under state control. Since then, Toyota said customers to its dealerships in china have decreased and an increasing number of orders have been cancelled. Toyota sold about 75,000 units in China in August and about half of many in September according to the sources. Deteriorating orders for new cars in China prompted Toyota to cut production at Chinese factories in October. In August, Toyota announced it would increase total global production to 10:05 million vehicles in 2012, a record production target for the firm because of this Toyota may have to revise its goal.

M2: write one paragraph summarising the information for each country. For each piece of data you should also write one paragraph stating how it will impact on the business in that country. The interest rate in the UK stayed at 0.5 % and they have decided to keep it quantitative easing at £325bn. In china the central bank said that on a Thursday it would cut its interest rates, the second time in less than a month that the bank has acted to jumpstart a slowing economy. The people’s bank in China bought its one year lending by 0.31% percentage point to 6%. The bank trimmed one year benchmark deposit rates by 0.35% point to 3%. The unemployment rate in the UK fell by 50,000 to 2.53m in the three months in August, taking the jobless rate down to 7.9% from 8.1% the number of people in unemployment has risen to 30 million, the office of national statistics has said.

The government then said this was positive news for labour highlighted the growing numbers of people in temporary or part time work because they could not get full time, permanent jobs. The unemployment rate in the UK was last updated at 7.8% in September 2012. however the urban unemployment rate in china was last reported at 4.1% in the quarter of 2012 from 2002 china’s unemployment rate averaged rate can be defined as the number of people who are actively looking for jobs as a percentage of labour force. The United Kingdom’s current account deficit was 20.8 million in the in the second quarter of 2012, up from revised deficit of 15.4 billion in the previous quarter. The trade deficit widened to 10.1 million in the second quarter of 2012, up from 8.1 million in the previous quarter. China’s foreign exchange rate that it ought to be news that they are no longer rising, being roughly at $3trillion, china experienced an outflow of capital in the second quarter of 2012.

When demand goes up supply goes up as well as labour which means Africa can make more orange juice.

Labour: for most businesses, the wage bill makes up about 70 per cent of all costs. Businesses need to employ labour with skills required for the job at an affordable wage rate. In a period of growth, it is more difficult to recruit enough labour with the right type of skills. For the first six or seven years of the new millennium, the British economy was growing steadily. A number of labour market shortages occurred and wages were rising. Fortunately, Britain was able to recruit additional labour from all over the world to fill the gaps. In a period of recession, it becomes much easier for employers to obtain labour with the required skills.

Demand this relationship between demand and price can be illustrated in a demand curve. A leisure club has carried out market research and found out that for a membership subscription for £20 per month, 1000 people will want to join. At £10 a month the figure would be 2000 and for £30 a month it would only attract 500 members. There are a number of factors influencing demand, including: Affordability

Competition and availability of substitutes
Level of income
Needs and aspirations of consumers.

Supply is the product is the quantity that a supplier is willing to provide at different prices. Typically suppliers will supply more at higher than at lower prices. For example, a charter airline might run six planes a day between Stansted and Paris when business passengers are prepared to pay £200 each for the return journey. However, if business passengers are willing to pay £300each then the airline might buy more planes and run nine planes a day. At £400, they might run twelve planes.

When the price of the goods is high Tesco will spend less on buying that product however when the price is low Tesco will spend more of that product. For example, the demand curve for a product shifts to the right when more of the good is demanded at a given price. For instance demand for Hello! Magazine might increase when: It becomes ‘the one to read’ – because it is seen as very fashionable to do so. Consumers’ incomes rise so that they have more money to spend on magazines. In these situations, demand for Hello! would shift to the right.

Global interaction involves the creation of global markets, global businesses and global products. Key aspects of globalisation include:
International level increasingly supplies come from all over the world – Tesco accesses supplies of oranges, grapefruit, bananas and kiwi fruit from a range of countries including Spain, Israel, Egypt, New Zealand and the West Indies. National level much of Tesco’s suppliers of meat and fish will be provided by suppliers within Britain Local level an organisation like Tesco gets many of its suppliers of fresh vegetables from local growers, and recruits staff for supermarkets locally.

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