For any number of reasons, consumers and businesses begin to reduce their spending levels. Businesses may lay off workers, reduce their purchases of raw materials and reduce production because they have built up excess inventories. Some businesses may decide to continue to use old factories and equipment rather than investing in new machines and buildings. Some businesses and consumers will even reduce spending because economists predict that business will be slowing down in the next few months. Whatever the reason, reductions in business and consumer spending mark the beginning of a contraction in the business cycle.
Recession
With factories operating at less than capacity and unemployment at very high levels, total output of goods and services enters a long-term decline. This is the bottom phase of the business cycle, or as economists describe it, the period of recession.
Times are hard during recession. Unemployment is very high, jobs are difficult to find and many businesses fail. A very severe and long-lasting recession is called a depression.
Expansion
After a period of recession the economy eventually begins to recover, entering the expansion phase of the business cycle. During a period of expansion the conditions are about to improve, business begins to expand its activities. Unemployment declines as additional workers are hired. This, in turn, leads to higher levels of consumer spending and still further expansion of employment, output and consumption.
WORD STUDY
Ex. 1. Study the different meaning of the following words and use them to translate the
Sentences.
a) expansion n 1) ( , , )
2) , ; ,
3)
b) to expand v 1) , ,
,
2) ,
3) ,
1. When air is warmed it expands and becomes lighter.
2. Rapid expansion of private health insurance is one of the characteristics of market economy.
3. Each cycle of recession is followed by a new period of economic expansion.
4. Expansion of gases when heated is a law of nature.
5. The company has abandoned plans for further expansion.
6. The aim of this gymnastic exercise is to expand the chest muscles.
7. Our trade with China is steadily expanding.
8. The director plans to expand the firm into an international company.
Ex. 2. Match the words and word-combinations listed in the box with their Russian
