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1.
Expansion phase
real income consumed, real income produced and the level of employment are high or rising, and there are no ideal resources or unemployed workers or very few either. The features of this phase are :
a. A large volume of production and trades. b. A high level of employment and job opportunities.
c. A rising price level. d. A rising structure of interest rate. e. A high level of real investment. f. Wage rate is very high. g. The economic reaches full employment by removing unemployment.
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2.
Recession phase:
begins. Recession relates to a turning point rather than a phase. It marks the point at which the forces that make for contraction finally win the forces of expansion. As a result, profit margins decline further because costs start overtaking prices. Some firms close down. a. There is fall in income and output. b. Worker are rendered unemployed. c. Prices begin to fall. d. Wages fall. e. Profit fall. f. Demand of the consumers for various goods fall.
g. There is a feeling of a doubt and fear among the people. 3.
Depression phase:-
A state of affairs in which real income consumed or volume of production per head and the rate of employment are falling and are sub-normal in the sense that there are idle resources and unused capacity especially unused labour. There are many characteristics: a. Level of output or income is low. b. Unemployment increases. c. Wages, interest and other cost decline. d. Price level falls. e. Demand for consumer good falls. f.Volume of profit falls sharply. g. Old and worm out machines are not replaced.
4.
Recovery phase:-
Recovery shows the upturn of the output and employment from the state of depression recovery is most probably the result of the fresh demand for plant and equipment arises from the consumer good. The capital goods have the limit life. They wear out
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completely after some time and need replacement. This replacement demand starts the recovery process. The characteristics are as: a. Replacement investment result into increase in income and outputs. b. Employment increases. c. Demand for conception and production good rises. d. Prices begin to look up. e. There are more profits. f.Cost increases relatively less. g. Investment increases. h. Demand for bank loans and advances increases.
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TIME
cause the economy to expand dispersions can be caused by substantial cut in government consumers and firms may cause
more rapidly than normal. Recessions and these same forces working in reverse. A spending or a wave of pessimism among the output of all types of goods fall.
Another possible cause of recessions and boom is monetary policy. The Federal Reserve System strongly influences the size and growth rate of money stock, and thus the level of interest rate in the economy. Interest rate in turn is a crucial determinant of how much firms and consumers want to spend. A firm faced with high interest rates may decide to postpone buildings a new factory because the cost of borrowing is so high. Conversely a consumer may be lured into buying a new home if interest rates are low and mortgage payment are therefore affordable. Thus by raising or lowering interest rates, the Federal Reserve is able to generate recessions or booms.
profits. As the recovery progresses prices can be increased and profits maximized. There is often pressure to invest, and management of expansion is one difficulty faced by management.
themselves should recession come. Should prices be pushed to the limit, or should firms concentrate on providing customer value? Profits will be lost if stocks are not built and sold, but high stock levels can sow the seeds of cash flow and liquidity problems during the recession which is likely to follow.
3. This is the time for shedding labour. Redundancies can be expensive, and can cause resentment and de-motivation amongst those employees who feel their jobs might be the next to go. To prevent these problems
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occurring firms should have a strategy of natural wastage that starts to be used when recovery is at its peak. Performance and productivity improvements can come through efficiency improvements.
4. Many firms believe that this is the time for retrenchment, concentrating on core business strengths. Others may look for the opportunity to buy and employ resources cheap, taking advantage of low costs.
2.
Fiscal Policy:-
economic activity of the government has greatly increased in the recent past. The government can significantly influence the occurrence of trade cycle by way of its fiscal policy that relates to its revenue. Fiscal instrument that control the occurrence of trade cycle are generally classified as:
1.
Built in stabilizers:-
These refer to those fiscal parameters that start operating in the system automatically. These are therefore also called automatic stabilizers. These built in stabilizers automatically change the flow of income or money between individual and corporation on the one hand and the government on the other. a. Progressive taxation
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taxation increase with the level of income. In the state of prosperity as the level of income rise progressive taxation ensures more income to the state in term of tax revenue.
2. Unemployment
the
period
of
prosperity
relates to policy of government specifically design to control cyclical changes in the system. These include Taxation policy, Public expenditure, and Public debt. These measures are of three types:
Changing a public expenditure while tax structure remains constant.
Changing a tax structure, while public expenditure remains constant. Changing both the tax structure as well as public expenditure simultaneously.
3.
Direct controls:following:
in the market. Price control also includes the support price policy of the government.
b. Quantity control:- that relates to distribution of goods through fair
price shops called rationing, licensing policy of government fixing production limits for certain strategic producing unit in the country.
c. Wage control:- that aim at the regulation of wages during periods of
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