High Inflation Reduces International Confidence Essay

Submitted By parra119
Words: 914
Pages: 4

Economic Cycle
The economic cycle is a constant cycle of expansion and contractions in the economy. The economic cycle shows the level of economic activity at that period. The cycle goes through expansions when the economy is growing and at a strong point with the top being called the peak. When the cycle goes through a contraction the economy falls and the level of economic activity is low, Both Expansions and contractions have an effect on Australian business and consumers
When the Economic cycle is going through a period of expansion the economic activity in Australia is high and both consumer and businesses are affected. When an expansion occurs the demand for products from business is high and the amount of output a business must create is high. When this demand is high more jobs are created due to the increased demand for production placed on businesses. When this demand is high and businesses are making major profits businesses tend to expand and innovate their product to keep up with the demand from consumers. When the economy is growing and going through a period of expansion jobs are a lot safer due to consumer demand. This means consumers will spend more money rather than putting it away because their confidence is a lot higher. This in turn adds to businesses profit and continues the expansion of the economy
When the period of expansion finishes a period of contraction follows. This is when the economy slows down and businesses suffer. Jobs can be affected, consumer confidence is low and overall people stop spending their money. During a period of contraction business lose demand for their products meaning that the amount of jobs needed or created is not high. This means businesses have to sack people and the amount of profit decreases. When the economy is going through a contraction because people are losing jobs people do not feel it is safe to spend their money. This means a lot of people put their money away and the economy suffers as people are not spending or investing. When the economy goes through a contraction both businesses and consumer suffer greatly and overall confidence is low.
During the 2009 global financial crisis we saw a great period of contraction leading to recession all over the world. The American economy crashed sending many other economies falling. This affected Australia as many people stopped spending fearing that the effects of the GFC could come to Australia. This meant people were not spending money. This meant business struggled to gain profit meaning many people lost their jobs as businesses could not afford to keep them. This led to high unemployment across Australia at around 6%. Although Australians felt the effects of the GFC Australia was one of the most successful countries during the GFC
Currency is the form of money or payment used in a particular country. In Australia the Australian dollar is used as the accepted currency. Currency is used in exchange for goods or services in that particular country. When goods or services are purchased overseas the currency used has to be in the form of that country. When the Australian dollar converts over to another country you are exchanging currency and the amount received is determined by exchange rates. When the Australia dollar gets stronger (appreciates) or becomes weaker (depreciates) it has an effect on both business and consumers.
When the Australian dollar appreciates it can be a direct result of increased trade with other countries or consumer confidence