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By:Yerra subbarayudu
DEFINITION
The term business cycle or trade cycle refers to economy-wide fluctuations in production or economic activity over several months or years.
These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (anexpansion or boom), and periods of relative stagnation or decline (a contraction or recession).
CHARACTERSTICS
Cyclical fluctuations are wave like shifts Fluctuations are recurring in nature They are non-periodic or uneven. In other words the
It gives the breif idea about fluctuations in exports and imports and to decision making accordingly.
PHASES OF B.C
The Four Phases of Business Cycle are : Prosperity or boom phase Recession phase Depression phase Recovery phase
PROSPERITY PHASE
When there is an expansion of output, income, employment, prices and profits, there is also a rise in the standard of living. This period is termed as Prosperity phase. Due to full employment of resources, the level of production is Maximum and there is a rise in GNP (Gross National Product). Due to a high level ofeconomic activity, it causes a rise in prices and profits. There is an upswing in the economic activity and economy reaches its Peak. This is also called as a Boom Period.
RECESSION PHASE
A period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters. A recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. A recession is generally considered less severe than a depression, and if a recession continues long enough it is often then classified as a depression. There is no one obvious cause of a recession, although overall blame generally falls on the federal leadership, often either the President himself, the head of the Federal Reserve, or the entire administration.
GLOBAL RECESSION
There is no commonly accepted definition of a global recession, although the International Monetary Fund (IMF) regards periods when global growth is less than 3% to be global recessions. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. Macroeconomic indicators such as GDP, employment, investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.
A global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices. In December 2008, the National Bureau of Economic Research (NBER) declared that the United States had been in recession since December 2007. Several economists predicted that recovery might not appear until 2011 and that the recession would be the worst since the Great Depression of the 1930s. The conditions leading up to the crisis, characterized by an exorbitant rise in asset prices and associated boom in economic demand, are considered a result of the extended period of easily available credit and inadequate regulation and oversight
DEPRESSION PHASE
When there is a continuous decrease of output, income, employment, prices and profits, there is a fall in the standard of living and depression sets in.
In depression, there is under-utilization of resources and fall in GNP (Gross National Product). The aggregate economic activity is at the lowest, causing a decline in prices and profits until the economy reaches its Trough (low point).
RECOVERY PHASE
The turning point from depression to expansion is termed as
SOURCES
http://www.investopedia.com/terms/b/businesscycle.asp #axzz2DQaYQBub http://kalyan-city.blogspot.in/2011/06/4-phases-ofbusiness-cycle-in-economics.html http://seekingalpha.com/article/824281-understandingthe-business-cycle-the-key-to-investor-success http://www.tutorsonnet.com/homework_help/macro_eco nomics/monetary_theory/business_cycles_assignment_h elp_online_tutoring.htm http://en.wikipedia.org/wiki/Business_cycle#Classificati on_by_periods http://en.wikipedia.org/wiki/Great_Depression
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