The Economic Cycle: Know This.

Just so everyone is on the same page in terms of understanding where we are heading and why.
From: http://recessionhistory.com/

The Economic Cycle:
When the economy is strong, most people are employed and making money. There will then be a larger demand for goods such as food, electronics & vehicles and this increases so much that the supply can not keep up with the demand. This excess demand creates a rise in prices, or inflation.
As prices go up, salary’s need to rise to keep up with the rising prices of goods The rise in employment cost for companies translates into a rise in prices for most items.
When the prices for goods and services get too high, consumers decide goods are too expensive and slow down or stop buying. When the demand decreases, companies lay off workers because they don’t need to make as much as before.
Decreasing demand fuels declining prices, which means the economy is in a recession.
Companies counter act this by lowering prices to spur the demand. As demand picks up, people begin buying again, fueling the need for greater supply. And the cycle starts again.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s