Business Cycle

    OCR
    GCSE

    Analyze the short-run fluctuations in real GDP around the underlying long-run trend rate of economic growth. Candidates must distinguish between the four distinct phases: boom, recession, slump/depression, and recovery. Assessment focuses on the characteristics of each phase, the impact of demand-side and supply-side shocks, the interaction of the multiplier and accelerator effects, and the efficacy of counter-cyclical macroeconomic policies in smoothing volatility.

    5
    Objectives
    4
    Exam Tips
    4
    Pitfalls
    3
    Key Terms
    4
    Mark Points

    Learning Objectives

    What you need to know and understand

    • Definition of Recession: Two consecutive quarters of negative economic growth.
    • Characteristics of a Boom: High confidence, high investment, demand-pull inflation.
    • Cyclical Unemployment: The specific type of unemployment caused by a downturn/recession.
    • Fiscal Impact: In a recession, tax revenue falls (income/corporation tax) and welfare spending rises.
    • Real GDP: The value of total output adjusted for inflation.

    Marking Points

    Key points examiners look for in your answers

    • Credit accurate definitions of phases, specifically defining a recession as two consecutive quarters of negative economic growth.
    • Award marks for logical chains of reasoning linking the cycle phase to specific types of unemployment (e.g., cyclical unemployment in a downturn).
    • Responses must distinguish between a reduction in the rate of growth (disinflation/slowdown) and negative growth (recession).
    • High-level responses must evaluate the impact of a boom on inequality and environmental sustainability, not just assume growth is universally positive.

    Examiner Tips

    Expert advice for maximising your marks

    • 💡When analysing data, explicitly quote figures from the provided charts to support your identification of the cycle phase.
    • 💡Ensure chains of reasoning are complete: Cause -> Transmission Mechanism -> Effect on Economic Agent.
    • 💡In evaluation questions, contrast the short-term benefits of a boom with long-term costs like demand-pull inflation.
    • 💡Allocate 1 minute per mark; do not over-write for 2-mark 'Explain' questions, save time for the 6-mark 'Evaluate' responses.

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Confusing a 'fall in the rate of growth' with a 'fall in GDP' (negative growth).
    • Asserting that inflation always falls during a recession (ignoring cost-push factors or stagflation).
    • Failing to use the specific term 'Real GDP' and instead using vague terms like 'money', 'sales', or 'production'.
    • Assuming government tax revenue remains constant regardless of the economic cycle phase.

    Study Guide Available

    Comprehensive revision notes & examples

    Read Study Guide

    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

    State
    Calculate
    Explain
    Analyse
    Evaluate
    Discuss

    Ready to test yourself?

    Practice questions tailored to this topic