What Is the Business Cycle - Essay Example

The economic situation in the country maybe not be encouraging, however; it is not entirely discouraging as the recent performance does not show a bleak situation.

The business cycle often passes through different phases which categorize as to whether the economy is passing through either contraction, expansion, or at the no movement level. (Moffatt). A recession occurs when a contraction is relatively harsher and is prolonged for more than three quarters.

It is also however important to understand the difference between the recession and depression before one can comment on whether the economy is sliding towards depression or in recession. In the US, the National Bureau of Research determines whether the economy is sliding towards recession or not.

A closer analysis of the data would suggest that the unemployment level is at 9% during the month of October which has slightly changed as compared to the previous month.  (Bureau of Labor Statistics). It is critical to understand that overall inflation is decreasing while the unemployment level remained relatively at the same level. A low inflation rate therefore can continue to encourage customers to increase their spending and resultantly increase the aggregate production within an economy.

In this paper, I will discuss what is going on in the economy and how it is going to affect the business in Ohio State. Besides, what actions can be taken to improve the situation?

There are two important factors that outline the overall nature of the economic activity and its direction within an economy i.e. productivity as well as the unemployment level. The level of unemployment within the US economy has been on the higher side since the economic downturn which started during 2007. The current figures suggest that the unemployment level in the US is 9% which is relatively on the higher side but is on the decline. The productivity has improved too from 0.1 to 2.3 from 2nd quarter of 2011 to 3rd quarter of 2011. Such a high increase in productivity, therefore, outlines that the US economy is relatively picking up and can make a strong rebound in a near future.

Data suggests that the gross domestic product rose by 4% [1]during the second quarter of 2011 showing a recovery from the previously depressing situation. A positive increase in gross domestic product therefore can be considered as one of the key signs of economic recovery as well as the improvement in the essential economic indicators.

These indicators suggest that the economy at the domestic as well as at the global level is not going through the depression but rather it is showing the signs of recovery and can kick start a new phase in the global economic history. Unlike the depression of 1930’s the overall situation currently is not the same because indicators are relatively showing a different figure. (Smiley)

The total level of unemployment within Ohio State as of Oct 2011 is 9% which is similar to what the US economy as a whole is experiencing. It is, however, important to note that the unemployment has reduced by 0.1% as compared to August 2011 suggesting that the Ohio economy, though is undergoing an economic downturn, but is also slowly making a recovery.[2]

Given the overall economic situation of the country, Ohio State may find an increase in the unemployment rate. A higher unemployment rate often reduces the demand for goods and services because of the decline in the income level. As such businesses may, at the one hand, can find skilled labor at a relatively lower cost but can also find themselves generating the demand because consumers may not be willing to spend much due to their low levels of income.

In order to improve the situation and generate the necessary demand, it is important to ensure that inflation remains at a low level. Low of demand can only stimulate if the inflation within the economy remains at a relatively low level so that the consumers can easily consume. A closer look at the personal consumption data suggests that it has increased from its level in 2010 to 2011 indicating that consumer confidence within the economy is increasing.