Bureau of Economic Analysis, (2012). U.S. Economic Accounts. Retrieved May 9, 2012 from: http: // www.bea.gov/
According to Bureau of Economic Analysis (2012), the economy’s current business cycle is expansion. This is attributed to the consistent growth rate in the real GDP since businesses are stabilizing and have started to produce more products as reported by the BEA in 2010. BEA (2012) notes that this expansion is also attributed to the rise in the Consumer Price Index which is caused by the increase in consumer demand which in turn encourages more production. Equally, there has been a steady but slow increase in employment rate, at 9%, due to the increase in investments around the world.
Gans, J. (2011). Principles of Economics. South Melbourne, Vic.: Cengage Learning.
Economically, increase in GDP is universally viewed by firms as an economic goal since it is an indicator for firms’ expansion. Gans (2011) notes that GDP does not necessarily means economic welfare since it does not put into consideration factors such as the households production and the value of leisure time. However, GDP is still preferred because it is the most accommodative method of determining the level of economic growth. Other factors such as GNP can also be used to measure the economic welfare.
Burdekin, K. (2004). Deflation: Current and Historical perspectives. Cambridge: Cambridge University Press.
Deflation, decrease in general price of commodities over a period, is another factor that slows the economic growth. It results into increased unemployment, reduction in profits, and the fall in the domestic capital. In order to reduce deflation, Burdekin (2004) observes that monetary policies such as increase in money supply by the central bank and reduction of interest rates should be put in place. He further notes that prolonged deflation can lead to businesses collapse because of insufficient profits or additional losses.
Steiter, D, & Rhodes, D. (2010).Accelerating out of the great recession: how to win in a slow-growth economy. New York: McGraw-Hill.
According to Steiter & Rhodes (2010), another factor that destabilizes the economy is the recession period. It is characterized by a general reduction in personal consumption. This phenomenon can be controlled and eventually eliminated by; increasing money circulation, balancing the interest rates, and finally reducing taxes. However, the businesses that operate as monopolies and the ones producing the necessary products may continue to thrive well since they do not experience any great decrease in demand. Its general effect to the firm is that of the reduction of profits and capital insufficiency.