Business confidence and stability Stability exists when businesses can make forecasts for the short and long term about likely demand for their products in the near future. Stability involves being able to make deals secure in the knowledge that the people you supply on credit will be able to pay you back the price agreed. An example of this would be a bank loan. Businesses like to have stable economic condition, this gives them and the customer’s confidence to go out and spend money. In other words, the demands for luxury items are still high. This is because when customers know that they could afford to buy something without worrying about losing their job they tend go out and purchase more products and therefore increase overall sales. This increase of sales due to high demand gives the business the confidence to not react hastily by sacking their employees, which is the first and easiest thing businesses do to cut down on costs when they are in a recession. A recession can have a negative effect on the business. This is because when the people involved in a business become more cautious, as mentioned before, customers cut back on spending and start to save more, manufacturers and sellers cut back on their orders, produce fewer and start to cut back costs in general, including by laying off workers. This drop in the value of goods results in both the business suffering and the employees since they are both interlinked. For example, if the business suffers then the employees are at a risk of being unemployed, thus they will spend less and businesses again will have a decrease in sales, this leads to a cycle of instability and lost profit. A ripple effect is created at the onset of recessions, this is the idea that after a few major or a-lot of minor companies are in a recession then the rest will follow. This is closely linked to the domino effect. This