Business Cycles,Recessions, and Depression

Due to the cyles of the economy the business cycle is hard to predict. Population and productivity make the economy rise, but the economy endures cycles of expansion and recession. "Business cycles are an unavoidable and largely unpredictable feature of market economies" (2 Ip). Prdeictions of this cycle are primarily made on gut feelings. Both the household and businesses aspect of the economy bet on and make plans based on how much they expect their sales or wages to grow.

Bear and bull markets are imbalances in the economy. A bull market is when prices are rising or are expected to, bear markets are more viloent than a bull market. "Bullish expectations boost investment, stock pricees, and lending, all of which feeed back to the economy" ( 6,7 Ip).  Throughout time the economy crashes it is just the reason why is what changes. For examplle "in the ninteenth-century America, it was often a natural disaster, a crop failure, or a bank panic" (3 Ip). Eventually every business expansion dies. 

A recession can be defined as "two or more consectuive quarters of declining GDP" (4 Ip). The start of a recession begins with a press release. "Thy delcare a recession whn they conclude there has been 'a significant decline in economic activity spread across the economy, lasting more than a few months' " (3 Ip). To investors, the start and the end declaration is useless. The word depression has changed over time to what we now call a recession (4 Ip). 

When the economies normal recuperative mechanisms fail to engage a recession becomes a depression. The aftermath of a depression is when it is usually undrstood. Banks are crippled when investment booms from compaines fail and loans they took out to finance them go bad. Also other countries collapses can lower affect our economy.  For example "Finland's GDP shrank 10 percent between 1989 and 1993 thanks to the collapse of the Soviet Union, a major trading partner, and its banks" (5 Ip). "Financial crises don't always produce depressions, but htey often leead to servere recessions with unusually weak recoveries" (5 Ip).  

In conclusion both consumers and businesses view of the future drive the cycles of the economy (6 Ip).

Once imbalances happen recessions occur. The Federal Reserve is responsible for adding to the production of it. The failure of the natural recuperative process comes from a broken financial system blocks the flow of credit (7 Ip). This is how a recession can become a depression. In a common situation a  recession leads to lower interest rates which then over time release the demand ending the recession (7 Ip).