GCSE Business (OCR)

Topic Summaries

Influences on businesses

The business cycle

The business cycle refers to the economic environment in which businesses operate.It has four main stages – growth, boom, recession, and slump – and affects demand, employment, and business investment.

Stage Description Impact on business
Growth Economy recovers, GDP rises Sales increase, investment grows
Boom Peak of economic activity High demand, high prices, full employment
Recession GDP falls, demand falls Sales drop, job losses, cost-cutting
Slump Prolonged low activity Businesses may close, high unemployment
  • Economic indicators and effects:
    • Employment: high employment means more consumer spending, whereas unemployment reduces demand for goods/services.
    • Inflation: rising prices may increase costs and reduce customer spending.Stable inflation helps businesses plan ahead.
    • Economic growth: strong growth creates opportunities for expansion, whereas a shrinking economy can reduce confidence and profits.

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