These variables move at about the same time in the same direction but at different rates.6. There is mass unemployment in the economy. Haberler’s definition is very simple – “The business cycle in the general sense may be defined as an alternation of periods of prosperity and depression of good and bad trade.” Keynes’ definition in his Treatise of Money is more explicit – “Business cycles consist of recurring alternation of expansion and contraction in aggregate economic activity, the alternating movements in each direction being self-reinforcing and pervading virtually, all parts of the economy.”“Cyclical fluctuations are characterised by alternating waves of expansion and contraction. Interest rates. Stabilisation policy should, therefore, control undesirable fluctuations.We conclude with Keynes, “The right remedy for the trade cycles is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom.”Before uploading and sharing your knowledge on this site, please read the following pages:

They do not have a fixed rhythm, but they are cycles in that the phases of contraction and expansion recur frequently and in fairly similar patterns.”3. Production increases and boom starts. Pervasive in effects – Whenever an expansion or … Suppose the semi-durable goods wear out which necessitate their replacement in the economy.It leads to increased demand.
In a business cycle, there are wave-like fluctuations in aggregate employment, income, output and price level. It buys securities in the open market. Investments are increasing with liberal bank credit. Similarly, population expansion and migrations are the causes of huge investments in both housing and other infrastructure and consumer durables. (i) Scarcities of labour, raw materials, etc. Investment, employment, income and demand decline. It is international in character. The study of alternating fluctuations in business activity, which is an inevitable part of economic development, is referred to in economics as The business cycle or trade cycle, as it is called in England, is an important feature of the working of the The business cycle is nothing but upward and downward of economic activity, going one after another in a cyclical way. When the economy is nearing the full employment level of resources, the ill-effects on production start appearing. Profits increase. Business Cycles: Meaning, Phases, Features and Theories of Business Cycle!
There is rise in interest rates due to scarcity of capital which makes investment costly.These two factors lower business expectations. On the other hand, nondurable goods industries experience relatively wide fluctuations in prices but relatively small fluctuations in output and employment.7. If there are downswing and upswing trends in a particular sector of the economy, they will not present trade cycle. Neither the central bank nor the commercial banks are able to induce businessmen and consumers to raise the aggregate demand. As a result, production will decline which will bring about a depression. There has been a long-run upward trend in Gross National Product (GNP), but … Business Cycle occurs periodically — in a regular fashion.4. Level of durable and luxury good consumption. leading to rise in costs relative to prices;(ii) Rise in the rate of interest due to scarcity of capital; and(iii) Failure of consumption to rise due to rising prices and stable propensity to consume when incomes increase.The first factor brings a decline in profit margins. The adjective “Business” restricts the concept of fluctuations in activities which was systematically conducted on a commercial basis. Phases 4. This increases or decreases the supply of money in the economy. And fluctuations in the rate of investment are caused mainly by fluctuations in the MEC. Corruption spreads in every walk of life. Effects 6. Fiscal measures are highly effective for controlling excessive government expenditure, personal consumption expenditure, and private and public investment during a boom. These in, turn, lead to changes in the demand for money on the part of producers and traders. But they exhibit a recognized pattern of recurrent expansion and contractions.From the definitions, we can gather the features of trade cycle, as follows:This means the prosperity and depression will be occurring alternatively. In the early stages of the revival phase, there is considerable excess or idle capacity in the economy so that output increases without a proportionate increase in total costs. To meet this increased demand, investment and employment increase. A cycle is thus complete.During the last several hundred years, philosophers, economists, stock brokers and men in the street have tried to give various causes of business cycles.


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