After understanding what are business cycle and their characteristics, we will take each phase of business cycle in detail.Prosperity or Expansion:This phase of business cycle is called the upswing. This phase is in the upper half of the cycle. To start with, we will try to see how this phase begins. It starts from equilibrium position. When the demand increases, the demand of raw material also increases and so the employment which again leads to increase in employment in other industry. As the consumption increases, general employment also increases. The wages, salaries, interest rates, taxes and the cost do not increase in the same proportion and consequently profit margins go up. There is a general feeling of optimism, and the production capacity of the economy is fully utilized. The rise in general price is marked...
Business Cycle and Characteristics of Business Cycle
Business cycle is also called Trade Cycle. The business is never steady. There are always ups and downs in economic activity. This cyclical movement both upwards and downwards is commonly called Trade Cycle. This is a wave like movement in regular manner in business cycle. In business, there are flourishing activities, which take economy to prosperity and growth whereas there are periods when there is recession, which leads to decline in the employment, income and output. When the economy goes into downswing then there is a stage of recovery to reach a new boom.Definition and characteristics of business cycle:Definition:According to Keynes, “Trade Cycle is composed of periods of good trade characterized by rising price and low unemployment percentage altering with periods of bad trade characterized by falling price and...
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