Fluctuations in economic activity that an economy experience over a period is referred to as a business cycle. It mostly encompasses expansion and recession periods that determine the level of economic growth and overall output. The current US economy is at the expansion phase. From 2009, after the global downturn, the economy has been on a tremendous rise during this. The country has experienced a significant growth in GDP that has increased from 1.3% in the last quarter of 2009 to 2.2% in the fourth quarter of 2014. It is also imperative to note that the level of unemployment has also decreased from 7% in 2014 to 5.5% as at May 2015. This is a clear indication of a continued expansion of the United States economy.
The prices of gasoline have also been free falling that will have a positive impact on the inflation levels in the country. This is because the prices of essential commodities such as food and energy will be relatively small as compared to other products. Interest rates are also expected increase that will encourage savings. It is, however, critical to note that the contraction effect was too severe, and thus it may take time for the economy to take to peak phase.
Low gasoline prices and food prices result in a positive inflation status of the country. From the Philips curve analysis, it is clear that there is some relationship between inflation and levels of unemployment. Reasonable prices for food and energy will lead to moderate industrial action since workers will be content with the current wages. This implies that employers will be willing to hire more people since there will be increased productivity and manageable wage burden. Gasoline prices play a critical role in determining the inflation as well as the unemployment levels. The levels of consumption in United States will also be substantial. Increased spending forms a vital part in the overall productivity and GDP of the country. Reasonable energy prices and increased employment are key indicators of better economic times ahead for the US economy.
Understanding the current economic status is essential for entrepreneurs. Information on the present economic status is available in the print and mass media. For instance, New York Times, on June 18 there was an article that indicated that consumer prices had posted the largest gains in more than two years. From the article, it is evident that the gains are as a result of the surged gasoline prices that have a definite relation to the inflation rates in the country. There also significant improvements in the CPI and growth in the level of employment.
Recession phase is a critical stage in business that is characterized by economic hardship. During this stage, the levels of output and the overall living standards of the population declines substantially. It is argued that policymakers have the capabilities to tame the adverse effects of economic recession. These policies should be based on understanding the major causes of economic downturn such as the fall in aggregate demand as well as the supply side shocks. There should policies that control energy and food prices that are critical to economic recessions. Inflation and rate of unemployment can be monitored through fiscal and monetary policies. Recession phase has very devastating effects on major firms in a country. For instance, the wage rates of the employees to the organizations are significantly affected. This is because the recession phase calls for wage cut that does not augur well with the employees. When there is a decline in wages, the population has less spending power thus leading to increased fall in aggregate demand. It is also essential to note that the level of confidence is at its lowest point during recessions thus making the level of spending low. This means that firms will suffer immensely both in terms of the labor market as well as the overall profitability.
Thomas Money Services has over the years been providing loans to consumers. As a result of the dynamic economic environment, the firm decided to finance forestry and construction equipment since the industry had been on the tremendous rise. This was a strategic move since it resulted in the establishment of the Future Growth Inc. (FGI). It is also worth noting that the organization spread its wings and started manufacturing this equipment. Nevertheless, the economic downturn and climate change have adversely affected the business. The level of competition has also increased resulting in declined profits. It is worth noting that the organization is flexible and has made strategic moves to deal with this problem. For instance, it has cut its advertisement expenditure by only using major sporting events and has also reduced the manufacturing cost by only producing at a level that only meets the demand.
From the Bury’s scenario, it is evident that life is about choices we make. It is prudent for us to note that the level of living standards we live is dependent on goods and services we require for survival. The products and services are produced through the essential factors of production. The issue of scarcity and opportunity cost are critical economic concepts that we should consider. Time and money are very scarce and individuals have the obligation of allocating these resources for optimum production. As entrepreneurs, we should make rational decisions that maximize productivity and overall well-being. Issues of price elasticity are also critical in making viable entrepreneurial decisions.
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies (18th ed.). Boston, MA: McGraw-Hill Irwin.Ch.28
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