The Trade Cycle: Questions and Answers [2001]

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Chris Larham’s responses to a series of questions relating to the trade cycle [2001] can be opened in a print-friendly text document format here
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The Trade Cycle: Questions and Answers [2001]

{Essay CONTENTS: Effects of economic recession; definition of ‘consumer durables’; stock level management; business preparation for recession; Government responses to ‘boom and bust’ economies; ‘CBI’ definition; ‘self-fulfilling prophecy’ definition; official Government line during economic recession.}

1.) Under trade cycle characteristics, what do you expect to happen when the economy goes into recession?

  • workers start saving money (disposable income stays the same)
  • less money in economy
  • fewer business start-ups
  • interest rates are reduced
  • increased business closures
  • consumer demand for goods and services decrease
  • low consumer confidence
  • companies reduce output
  • staff redundancy
  • cancel capital investment
  • reduce orders of supplies

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2.) What are consumer durables?

  • ‘big-ticket’ items
  • ‘white goods’

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3.) “Stock building during recovery and de-stocking in recession?”

  • increasing stock levels in readiness for increased demand
  • decreasing stock levels in readiness for decreased demand

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4.) How should firms prepare for a recession?

  • ensure liquidity is high and borrowings low to survive an unexpectedly bad year or so

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5.)What have Governments tried to do in the ‘boom and bust’ economies?

  • try to break the cycle; provide a more stable economy for businesses to operate in; improve business and consumer confidence; enable businesses to plan ahead with more accuracy – decreasing fluctuations in the economy

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6.) What is the CBI?

  • a research group, Confederation of British Industry, measuring business confidence on a quarterly basis

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7.) What is meant by a self-fulfilling prophecy?

  • where your actions are governed by your intentions – prediction changes attitudes and actions

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8.) Why would the Government wish to ‘talk up’ the economy during a recession?

  • confidence produces a self-fulfilling prophecy – optimistic outlook increasing spending

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34-year-old father of three wonderful children [William, Seth, and Alyssa]. Works as an Assistant Technical Officer in the Sterile Services Department of Treliske Hospital, Cornwall. Enjoys jogging, web design, being a bit of a geek, and supporting Arsenal FC. Obtained a BA degree in English from the University of Bolton in 2008, and has continued to gain qualifications in a diverse range of subjects thereafter.

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