THE BUSINESS CYCLE PROFESSIONAL ENGLISH IN USE FOR FINANCE

 

PROFESSIONAL ENGLISH IN USE FOR FINANCE 48. THE BUSINESS CYCLE

 

A Expansion and contraction All market economies have periods when consumption – spending on goods and services – rises. Consumers buy more, companies invest more, and production, income and profits and employment increase. These periods are always followed by periods when spending and investment fall, and unemployment rises. This is the business cycle. B Fiscal policy Governments and central banks use fiscal policy, which involves changing the levels of government expenditure and taxation to try to limit the extent of the business cycle. C Monetary policy Governments or central banks can also use monetary policy – changing interest rates and the level of the money supply – to influence the level of economic activity. They can boost or increase economic activity if the economy is in a downturn by reducing interest rates and allowing the rate of growth of the money supply to increase. Alternatively, if the economy is growing too fast and causing inflation, they can slow it down by increasing interest rates and reducing the rate of growth of the money supply. EXERCISES 48.1 Label the graph with words from the box. Look at A opposite to help you. boom downswing peak recession recovery trough 48.2 Match the two parts of the sentences. Look at B and C opposite to help you. 1 If the government thinks the economy is contracting too much, 2 Fiscal policy involves 3 If there isn’t an independent central bank, governments can 48.3 Find verbs in A and B opposite with the following meanings.

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