Question

There are six stages of a business cycle: the expansion, the peak, the recession, the depression, the trough and then, the recovery. The first stage in the business cycle is the expansion. In this stage, there is a lot of positive economic growth, which is an indicator of employment, income, output, wages, profits, demand, and supply increasing during this time period. The peak is where the maximum limit of growth has been attained. Prices are at their highest at this stage. A recession follows the peak, as the income, output, and wages start to decline. Since the recession gradually shows signs of declination, producers are still outputting products, leaving the economy with excess supply in the market. The depression stage is marked by the ride in unemployment. The depression starts once we fall below the growth trend line. The trough is depicted as the lowest point of the depression where the economic growth is negative. There is an extensive depletion of national income and expenditure. The recovery is the progress that have been made after the trough or the lowest point of the economic growth during this business cycle, up until the growth rate trend. The consumers begin to see the upside of investing and employment.

Reply to at least 2 of your classmates. Be constructive and professional in your responses.

Answer 1

COVID -19 has induced a recession globally and this crisis is not based on financial speculation but on human behavior and choices. Unlike the other crisis which impacted aggregate demand first, the virus led to a complete shutdown of international trade and  industries inducing an economy into supply shock hence the prolonged duration of the shut down put the economy into demand shock. The lockdown led to increased unemployment especially with respect to migrant and daily wage workers but also a cut in wages. With the complete closure, trade has been minimal hence putting economic integration into a backseat. Many economies, for instance, Saudi Arabia has been affected by the fall in demand for oil hence inducing excess supply of oil predominantly characterizing recession.