Economic factors: GDP

GDP is a measure of economic activity, the total value of a country's output over a given period of time, usually provided as quarterly or annual figures. 

GDP statistics are usually presented in 'real' terms, that is they are adjusted to take account of changes in price levels. Growth in GDP is usually associated with higher standards of living. This is because increasing levels of production of goods and services allow incomes to rise, which in turn allow for higher levels of consumption. 

GDP and the business cycle 

The business cycle is the regular pattern of ups and downs in demand and output within an economy, or of gross domestic product growth over time. It is characterised by four main phases boom, recession, slump and recovery. Some firms are more vulnerable to changes in the business and some of these are known as cyclical businesses because demand for their product fluctuates in line with the business cycle. The extent to which a business is affected by the business cycle depends on the income elasticity of demand for its products.

Possible causes of the business cycle  

• Changes in business confidence which lead to changes in the level of investment in fixed assets.
• Periods of stock or inventory building and then de-stocking. This depends on the business confidence to sell inventory 
• Irregular patterns of expenditure on consumer durables, eg cars and televisions. -influenced by the level of interest rates
• Confidence in the banking sector & its…