Business cycles
In Mexico there's a business cycle every 6 years for the presidential elections. Economy activity goes down in the first year of the new administration. The Business cycle has 4 stages:
- peak: max employment and production = protential production.
- recession: start to decrease prodution and employment. Companies start to cut off budgets and lay off workers.
- trough: Minimum production reached, maxium unemployment.
- expansion: Production increases, less unemployment, more debt is created and increases interest rate -> inflation.
Capital deepening: INcrease in capital that is faster than increase in labor. Example: A bank has only 5 tellers but the queues get long. It then buys and installs 50 Automated Teller Machines (ATM's). Is capital deepening as the bank increases machine (physical capital) but not the number of workers (tellers).
Mexico is a country of services as it accounts for 58.8% of GDP while industry for 32.1% and agriculture for 4.1%.
To increase productivity, we must increase the factors of production:
- Land
- Labor
- Capital
- Entrepreneurship
Technological advancements: Refers to changes in production processes or the invention of new products that serve as inputs to produce others. With techonological advances, we can increase the production as it afects the factors of production of capital and labor.