The Affect of Recession During the Economic Cycle

297 Words2 Pages
We will be looking at 2 aspects of the economic cycle, here is an example of an economic cycle graph. We will be analysing the recession, which is the downward growth from the ‘boom’ to the ‘bust’ and the ‘boom’ itself. Recession is continuous negative growth of GDP for 2 quarters (6 months). Direct affects of this would be rising unemployment, a decrease in consumer expenditure, lower investment and therefore a low inflationary pressure. With these factors taken into consideration, a decrease in consumer expenditure would be a direct causation to a lowering of both organisations activity. For example, due to recession unemployment will rise as the companies can’t afford to pay employees, and therefor people as a whole have less money to spend, and so donating to causes such as Oxfam would come more unlikely as there will be less money revolving them. This could cause a cut on their government funding as more money will need to be invested to government funding for those out of employment. With a low flow of money inward to the company it means they wont afford the expenditure necessary to fund projects for helping those, therefore lowering the activity of the charity. The same rule may apply to Arsenal FC. As a football club a large source of their net profit comes from ticket sells. With lower employment again consumer expenditure correlates and as one goes down so will the other. Therefore Arsenal will see a decrease in ticket sells, which will cause detriment their profit gradually but greatly. Due to a high inflationary pressure, this meaning that the cost of goods and services rises quicker than wages, therefore causing financial strain, it becomes harder for those affected by the recession to come out of its vicious
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