Introduction Economic activity European Union Operating companies Profit centres Business cycle
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IntroductionEconomic activityEuropean UnionOperating companiesProfit centresBusiness cycle
Macroeconomics
Macroeconomics is the study of aggregate economic behavior, of the economy as a whole. With the aim of:Providing theories to explain problems such
as negative growth, unemployment, inflation, ….Using models, graphs, etc.
Recommending economic policies: to correct or solve economic problems
Trough
Peak
RE
AL
GD
P (
units
per
tim
e pe
riod)
TIME
Peak
Peak
Trough
recession expansion
Business Cycle
Growth trend
If =>6 months No time requirement
Business Cycle
recessionary gap
RE
AL
GD
P
TIME
Growth trend
REAL GDP
Pric
e Le
vel
There are many determinants that cause shifts in the AD and AS curves. Which impact the business cycle.
AD
AS
Therefore the AD-AS model can be used to explain both business cycles and inflation (demand-pull and cost push)
What happens to the level of economic activity in a recession?In an economic recession, Gross Domestic Product
growth is negative for a period of two quarters or more.
Unemployment levels rise as a result of many firms resorting to decreasing the number of staff as a part of cost cutting.
There is decline in the levels of spending by consumers due to decline in their confidence levels.
businesses close down.many businesses cut down on their investment in
new plant and equipment.firms are forced to reduce prices of the commodities
to attract consumers. An unhealthy stock market
•It is unhealthy for any nation to be in Recession;•So, Government will take certain countermeasures •to eliminate or reduce the Effect of recession for turnaround;
•Important Point: •Today, it is a market Economy
•Producers;•Can produce and •sell at their prices
•Consumers;•Can decide to
•buy or not;
•Both Producers and Consumers are free to act; Not a forced action
How to come out of recession?
How has Davis minimisedthe negative impact of the recession in 2008 and 2009?Davis empowered managers in local operations
to make decisions for themselves. cutting back on products and services that are
not performing so well.Cost savings. Davis re-allocates production.between its plants to make best use of resources.Davis Service Group maintained a strong
financial position.Dealing carefully with interest rates and
exchange rates.Keeping shareholders happy.
Preparing for recovery.
How can a business can reduce the impacts of the trade cycle on its performance?Keep innovatingPlay to your strengthsShare best practices Challenge traditional business
activitiesGive value to your customers.