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Business Cycles (Part 1/2 - Phases) - YouTube
Channel: Plenous Ed
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Business cycles
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Cycles are pattern that repeat over a period
of time. There are various cycles ranging
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from weather patterns at global level to emotional
cycles at individual level. When we talk of
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finance a very important cycle to understand
is business cycle, it is also called Economic
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cycle. It gives insight to flow of money and
its effect on people, businesses, markets
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and economies.
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There are four main phases of business cycles.
These are: -
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1. Inflation
2. Recession
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3. Depression
4. Recovery
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But for this video we'll break business cycle
into six main phases. These are: -
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1. Inflation
2. Peak
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3. Burst
4. Recession
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5. Depression
6. Recovery
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Phase 1 : Inflation
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It is the period in which things look positive,
there is good news every where. People are
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positive about themselves and their future,
thus they spend on things they love like:
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- wine, women, cars, houses, etc (mostly on
consumable items). This creates lot of demand
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for goods and resources, thus businesses expand
quickly, hiring more and more people. Soon
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there is so much demand in market that it
is difficult to find workers and people are
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paid with higher and higher salaries which
lead to increase in standard of living. The
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growth is also visible on rising stocks markets,
commodities, real estate, etc.
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Phase 2 : Peak
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In this period things looks awosome, where
ever you look, its wonderfull, whatever you'll
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hear, is great news, its party time (its b'day)
for everyone. There is so much demand for
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investments, workers, resoures that every
sector of market is zooming. Stocks markets
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are higher like never before, people spend
lavishly on expensive wines, premium cars,
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pent houses, prostitues, etc. Businesses take
more and more risks with bigger and bigger
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investment. They invest heavily in new ventures
and pay lavish salaries to retain or hire
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workers. Soon one of sectors climb rapidly
and every one want to get in "once in a life
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time opportunity", the prices move up so fast
that they double in few days, making people
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go crazy and they invest with there life savings
or hefty loans. There is so much money to
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be make that 'nothing can go wrong'.
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We'll cover other phases of business cycle
in our next video as we don't want to make
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ths video lengthy.
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