The business cycle is crucial for businesses of all kinds because it directly affects demand for their products. Boom: high levels of consumer spending, business confidence, profits and investment. Prices and costs also tend to rise faster. Unemployment tends to be low as growth in the economy creates new jobs.

Why does the production of consumer durable goods fluctuate more than real GDP over the business cycle?

As a response to the fall in demand for​ durables, the production of such goods tends to fall more than real GDP. On the other​ hand, the demand for durable goods increases considerably during expansions and thus production for these goods increases more than the increase in real GDP.

What are the different phases of the business cycle and how are production and employment affected in each phase?

Business Cycle Phases Business cycles are identified as having four distinct phases: expansion, peak, contraction, and trough. An expansion is characterized by increasing employment, economic growth, and upward pressure on prices.

Why do purchases of durable goods fluctuate more over the course of a business cycle than non durable goods?

Durable goods provide a stream of services or utility over time. As a result of these two properties, consumer spending on durable goods is more volatile than spending on non-durable goods and services, and tends to be more closely related to the economic cycle.

What are examples of non durable goods?

Consumer nondurable goods are purchased for immediate or almost immediate consumption and have a life span ranging from minutes to three years. Common examples of these are food, beverages, clothing, shoes, and gasoline.

How does the business cycle affect capital goods?

The business cycle affects output and employment in capital goods industries and consumer durable goods industries more severely than in industries producing consumer nondurables because the quantity and quality of purchases of nondurables will decline, but not as much as will purchases of capital goods and consumer durables.

Why does the length of the business cycle vary?

Business cycle lengths vary. Seasonal variations and long run trends complicate the measurement of the business cycle because people are not prepared for the shift in the cycle since they are unexpected.

How does seasonal variation affect the business cycle?

Seasonal variations and long run trends complicate the measurement of the business cycle because people are not prepared for the shift in the cycle since they are unexpected.

What are the four phases of the business cycle?

The four phases of the business cycle are peak, recession, trough, and expansion. Business cycle lengths vary. Seasonal variations and long run trends complicate the measurement of the business cycle because people are not prepared for the shift in the cycle since they are unexpected.