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Business Cycles AND Infiltration

The document discusses various methods for stabilizing business and the economy, including: 1) Matching production levels to consumption to prevent overproduction and layoffs. 2) Controlling the availability of credit to only grant it to qualified businesses and prevent overborrowing. 3) Engaging in business forecasting to reduce risks and support planning like capacity and inventory levels. 4) Adjusting monetary standards like the peso's weight to keep prices stable as they rise and fall.

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Buen Caloy Llavore
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26 views9 pages

Business Cycles AND Infiltration

The document discusses various methods for stabilizing business and the economy, including: 1) Matching production levels to consumption to prevent overproduction and layoffs. 2) Controlling the availability of credit to only grant it to qualified businesses and prevent overborrowing. 3) Engaging in business forecasting to reduce risks and support planning like capacity and inventory levels. 4) Adjusting monetary standards like the peso's weight to keep prices stable as they rise and fall.

Uploaded by

Buen Caloy Llavore
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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“BUSINESS CYCLES

AND
INFILTRATION”
STABILIZATION OF BUSINESS
 FAVORABLE BUSINESS CONDITIONS MOST OFTEN PROD BUSINESS FIRMS TO PRODUCE
OUTPUTS MUCH MORE THAN WHAT THE CONSUMERS NEED. CONTINUITY IS A VERY
IMPORTANT ASPECT OF ECONOMIC ACTIVITIES. A CERTAIN LEVEL OF PRODUCTION,
FOR INSTANCE, MUCH BE MAINTAINED AT A CONSTANT RATE.
 A COMPANY THAT PRODUCES MORE THAN THE DEMAND CANNOT DO SO
CONTINUOUSLY.
• AT A CERTAIN POINT, IT WILL HAVE TO STOP PRODUCING OR REDUCE OUTPUT AND WAIT UNTIL
EXCESS STOCKS HAVE BEEN DISPOSED OF.
• WHEN THIS HAPPENS, THE COMPANY WILL HAVE TO LAY-OFF SOME WORKERS, DISPOSE OR
DECOMMISSION SOME EQUIPMENT, REDUCE INVESTMENTS, ETC.
 IT IS NOT HARD TO UNDERSTAND THAT TO PREVENT SUCH THINGS TO HAPPEN, BUSINESS FIRMS
MUST ENGAGE IN PRODUCING AT A LEVEL THAT CAN BE SUSTAINED. TO ATTAIN BUSINESS STABILITY,
PRODUCTION MUST MATCH CONSUMPTION.
CONTROL OF CREDIT
 CREDIT IS VERY USEFUL IF APPLIED WISELY. WHEN CREDIT IS GRANTED TO A DESERVING
BUSINESS FIRM, IT WILL FACILITATE THE PRODUCTION OF GOODS AND SERVICES NEEDED BY
THE MARKET.
 THE GRANTING OF CREDIT TO AN INDIVIDUAL OR A BUSINESS FIRM GIVES THEM THE
PURCHASING POWER THAT THEY DO NOT HAVE AT THE MOMENT.
• IF SUCH CREDIT IS NOT PROPERLY USED, THE DEBTOR MAY BE PLACED IN A POSITION
WHERE REPAYMENT CANNOT BE MADE.
 WHEN CREDIT IS READILY AVAILABLE, CONSUMERS TEND TO AVAIL OF IT EVEN WHEN IT IS
NOT REALLY NECESSARY.
• THIS WILL INCREASE DEMAND AND WILL PROVIDE A STRONG PRESSURE FOR INCREASE IN
THE PRICE OF COMMODITIES.
THE REAL OBJECTIVE OF CONTROLLING CREDIT IS TO GRANT IT ONLY TO THOSE WHO ARE
REALLY QUALIFIED TO USE IT. MANY FIRMS WILL BORROW MONEY FOR EXPANSION. MANY OF
THEM WILL PRODUCE MORE THAN THEY CAN DISPOSE.
BUSINESS FORECASTING
 A VERY IMPORTANT ACTIVITY THAT A BUSINESS FIRM MAY ENGAGE IN IS BUSINESS
FORECASTING. THIS INVOLVES
“COLLECTION OF PAST AND CURRENT INFORMATION TO MAKE PREDICTION ABOUT
THE FUTURE.”
 IF BUSINESS FIRMS MAKE THE RIGHT DECISIONS, THEY WILL BE ABLE TO SURVIVE
EVEN THE HARSHEST ECONOMIC CONDITIONS. THE AIM OF BUSINESS FORECASTING
IS
“TO REDUCE RISK IN DECISION MAKING.”
 THE VARIOUS DEPARTMENT LEVEL PLANNING UNDERTAKEN BY FIRMS (LIKE
CAPACITY PLANNING, PRODUCTION AND INVENTORY PLANNING, ETC.) IS BASED ON
BUSINESS FORECASTS.
 IF THE CORRECT FORECASTS WERE MADE, STOCKPILES OF UNSOLD GOODS DUE TO
OVERPRODUCTION WILL BE MINIMIZED. FIRMS WILL BE ABLE TO STABILIZE
OPERATIONS.
MONETARY READJUSTMENT
 THE STABILITY OF BUSINESS FIRMS DEPENDS MUCH ON THE STABILITY OF PRICES. TO
KEEP PRICES STABLE, ONE SOLUTION ADVOCATED BY EXPERTS IS THE
READJUSTMENT OF THE MONETARY STANDARD.
 THE PESO IS A MONETARY UNIT THAT IS EXPRESSED IN WEIGHT OF THE METAL
CURRENTLY USED AS MONEY. TO MAINTAIN STABLE PRICES, THE WEIGHT OF THE
MONETARY UNIT (THE PESO) WILL BE ALTERED AS TO ADJUST TO THE CHANGES IN
THE PRICES OF COMMODITIES.
 WHEN PRICES ARE FALLING, THE WEIGHT OF THE PESO IS DECREASED TO MAKE THE
PRICES OF COMMODITIES RETURN TO NORMAL.
 WHEN THE OPPOSITE HAPPENS (I.E., PRICES ARE RISING), THE WEIGHT OF THE PESO
IS INCREASED AND THE EXPECTED RESULT IS FOR PRICES TO GO DOWN.
TO EFFECTIVELY IMPLEMENT THE PLAN OF READJUSTING THE
MONETARY STANDARD, THE FOLLOWING REQUISITES MUST BE PRESENT:

1. A MECHANISM THAT PROVIDES A RELIABLE INDEX


NUMBER OF PRICES;
2. THE GOLD STANDARD IS USED WHERE THE MONETARY
UNIT CONTAINS A FIXED WEIGHT IN GOLD.
PAYMENT OF HIGH WAGES
 BUSINESS FIRMS SURVIVE BECAUSE OF SUFFICIENT DEMAND FOR THEIR PRODUCTS.
DEMAND WILL BE CONSTANT, HOWEVER IF THE INCOME RECEIVED BY THE
CONSUMERS IN THE FORM OF WAGES IS NOT REDUCED.
 WHEN WAGES ARE HIGH, PURCHASING POWER WILL ALSO BE HIGH, KEEPING
BUSINESS FIRMS PROFITABLE ENOUGH TO CONTINUE OPERATING.
 WHEN THE BUSINESS CONDITIONS TURN BAD, EMPLOYEES ARE USUALLY LAID OFF
FROM THEIR JOBS, LEAVING THEM WITHOUT SOURCE OF INCOME. THIS WILL
AGGRAVATE THE SITUATION OF LOW DEMAND FOR PRODUCT AND SERVICES. THIS
WILL LEAD TO FURTHER CUTS IN THE EXPENDITURES OF FIRMS.
 ONLY A BUSINESS FIRM THAT IS WELL MANAGED CAN AFFORD TO PAY HIGH WAGES
AND MAINTAIN ITS WORKFORCE EVEN DURING TIMES OF EMERGENCY.
ECONOMIC PLANNING
 ECONOMIC PLANNING REFERS TO “PLANNING THE FUTURE
FINANCIAL STATE OF THE COUNTRY FOR THE GOVERNMENT.” IT IS
AN ACTIVITY THAT ATTEMPTS TO ORGANIZE THE DIFFERENT
ECONOMIC RESOURCE IN THE BEST POSSIBLE WAY TO MAINTAIN
BUSINESS STABILITY.
 THE OBJECTIVE OF ECONOMIC PLANNING IS TO CONTROL
ACTIVITIES THAT MAY TRIGGER A CRISIS SITUATION.
 THE MAIN OBJECTIVE IS TO SEE IT THAT PRODUCTION DOES NOT
OUTPACE CONSUMPTION.
“THANK YOU”

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