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    Business Cycle: Priya Gupta MBA Ist Semester

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    Himanshu Garg
    The document discusses the business cycle, which refers to fluctuations in economic activity over time. It describes the four phases of the business cycle: expansion/boom, recession, depression/trough, and recovery. During expansion, economic activity increases as income, output, prices and employment rise. Recession begins as some investments prove unprofitable, leading to falling income and employment. Depression is a period of low economic activity, widespread unemployment, and falling prices and wages. Eventually, recovery begins as the economy improves production techniques and demand increases again. The causes of business cycles can be both external factors outside the economy as well as internal factors generated within the economic system.

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    Business Cycle: Priya Gupta MBA Ist Semester

    Uploaded by

    Himanshu Garg
    39 views16 pages
    The document discusses the business cycle, which refers to fluctuations in economic activity over time. It describes the four phases of the business cycle: expansion/boom, recession, depression/trough, and recovery. During expansion, economic activity increases as income, output, prices and employment rise. Recession begins as some investments prove unprofitable, leading to falling income and employment. Depression is a period of low economic activity, widespread unemployment, and falling prices and wages. Eventually, recovery begins as the economy improves production techniques and demand increases again. The causes of business cycles can be both external factors outside the economy as well as internal factors generated within the economic system.

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    Economics

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    The document discusses the business cycle, which refers to fluctuations in economic activity over time. It describes the four phases of the business cycle: expansion/boom, recession, depression/trough, and recovery. During expansion, economic activity increases as income, output, prices and employment rise. Recession begins as some investments prove unprofitable, leading to falling income and employment. Depression is a period of low economic activity, widespread unemployment, and falling prices and wages. Eventually, recovery begins as the economy improves production techniques and demand increases again. The causes of business cycles can be both external factors outside the economy as well as internal factors generated within the economic system.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    39 views16 pages

    Business Cycle: Priya Gupta MBA Ist Semester

    Uploaded by

    Himanshu Garg
    The document discusses the business cycle, which refers to fluctuations in economic activity over time. It describes the four phases of the business cycle: expansion/boom, recession, depression/trough, and recovery. During expansion, economic activity increases as income, output, prices and employment rise. Recession begins as some investments prove unprofitable, leading to falling income and employment. Depression is a period of low economic activity, widespread unemployment, and falling prices and wages. Eventually, recovery begins as the economy improves production techniques and demand increases again. The causes of business cycles can be both external factors outside the economy as well as internal factors generated within the economic system.

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    of 16

    BUSINESS CYCLE

    PRIYA GUPTA
    MBA
    Ist SEMESTER
    MEANING OF BUSINESS
    CYCLE:-
    THE TERM OF BUSINESS CYCLE REFERS TO A
    WAVE LIKE FLUCTUATION IN THE OVERALL
    LEVEL OF ECONOMIC ACTIVITY
    PARTICULARLY IN NATIONAL INCOME,
    OUTPUT, PRICE LEVEL, EMPLOYMENT ETC.

    Acc to professor. Haberler


    “The business cycle in the general sense
    may be defined as an alternation of
    periods of prosperity and depression of
    goods and bad debts.”
    FEATURE OF BUSINESS CYCLE
    Cyclical fluctuation are wave like
    movements.
    Fluctuation are repeating in nature.

    They occur in income, employment, prices

    and output.
    These variable move at about the same time

    in the same direction


    but at different rates.
    Business cycle are not seasonal fluctuation.

    ACC. To professor Schumpeter:


    There are three types of trade cycle:-

    VERY LONG CYCLE- 50 TO 60 years


    MAJOR CYCLE - 8 TO 12 years
    MINOR CYCLE - 2 TO 5 years
    PHASES OF BUSINESS
    CYCLE
    1. expansion/boom/prospering
    2. recession
    3. Depression/trough/contraction
    4. Recovery.
    BOOM
    IN
    C

    Re
    RE

    ce
    ssi
    A

    on
    SE

    A B C

    y r
    De

    ove
    pr

    Rec
    ess
    i
    on

    TROUGH
    Now, the upper half of the business cycle from A to B is divided into
    two parts:
    a) INCREASING b) RECESSION
    And the lower half of the cycle from B to C is also divided into two
    parts:
    EXPENSION
    This phase of the cycle represent the
    best stage of prosperity. In this phase
    economic activity go on and factor of
    production are put to optimum use.
    And there is always rise in the
    national income, output, capital
    expenditure, prices, finished goods,
    and also the stock of both input and
    output increases.
    FEATURES OF EXPENSION
    Income and the production is the maximum.
    Price rise and wage rate are very high.

    Expansion in bank credit.

    Increase in consumption expenditure so

    demand also increase.


    Economy reaches full employment by
    removing unemployment.
    RECESSION
    Under the phase of prosperity, the
    entrepreneurs make investment in
    certain ventures which do not prove to
    be profitable and this investment
    shows signs of Recession.
    And in this many production
    units are closed down, unemployment
    spreads and income of the people
    starts falling.
    THEIR OPTIMISM(Hope) GIVES
    WAY TO PESSIMISM(Worst).
    FEATURES OF RECESSION
    There is fall in income, employment,
    Prices and wages began to fall.

    Contraction of bank credit.

    Decline in the stock of goods.

    Demand of the consumer for the various

    goods also falls.


    When profit falls then there is no

    borrowing.
    DEPRESSION
    Once the process of recession start it becomes
    almost difficult to stop. And it create hopeless
    depression. Consequently economic activity are
    faced with depression.
    and in this employment is very low, heavy
    fall in price, income and wages, prices of the raw
    material fall.

    WORKERS ARE HIT ADVERSELY BECAUSE


    OF WIDESPREAD UNEMPLOYNMENT.
    FEATURES OF DEPRESSION
    Demand for the consumer good falls.
     Unemployment increases

    Old and outdated machines are not


    replaced
    Low demand for loan from bank.

    A high rate of business failure


    RECOVERY
    Depression can’t last long forever. After a period
    of depression recovery start. In depression the
    entrepreneurs don’t even replace machines and
    other capital goods. production falls considerably.

    In recovery they buy new machines which result


    in more demand for capital goods. There is
    increase in output and employment.

    THUS THE ECONOMY GRADUALLY MOVES FROM


    DEPRESSION TO RECOVERY.
    FEATURES OF
    RECOVERY
    Change in the production techniques and
    business strategies.
    Demand for the bank loans and advance

    increases.
    Demand for consumption and production

    good rises.
    Investment increases

    THUS OUR PESSIMISM(worst) GIVE


    PLACE TO OPTIMISM(hopeful).
    CAUSES OF BUSINESS
    CYCLE
    EXTERNAL FACTORS

    These factors generate outside the


    economic like wars, revolutions, political
    events, growth rate of population,
    scientific and technological discoveries
    and innovation.
    INTERNAL FACTORS
    This factors are those which generate with
    in the economic system and which give
    rise to self-generating business cycles.
    EXPENSION-RECESSION-DEPRESSION-
    RECOVORY
    IT INCLUDES:-

    1. BANK CREDIT
    2. OVER SAVING OR UNDER CONSUMPTION
    3. INNOVATIONS
    4. PSYCHOLOGICAL CAUSES
    5. MARGINAL EFFICIENCY OF CAPITAL
    THANK
    YOU

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