BUSINESS CYCLE

IS THE ECONOMY GETTING BETTER

OR WORSE?

BUSINESS CYCLE
The term business cycle refers to economy-
wide fluctuations in production, trade, and
general economic activity.
Business cycle fluctuations occur around a
long-term growth trend and are usually
measured by considering the growth rate
of real gross domestic product.
Business Cycles are also known as Trade
Cycles.


In recent years economic theory has
moved towards the study of economic
fluctuation rather than a business cycle.
Keynesian Theory : Fluctuations in
aggregate demand cause the economy to
come to short run equilibrium at levels that
are different from the full employment rate
of output. These fluctuations express
themselves as the observed business cycles.



IS IT CYCLE OR FLUCTUATION?

PHASES OF BUSINESS CYCLE
A business cycle is a sequence of economic
activity in a nation's economy that is
typically characterized by Five phases
Expansion or Recovery, Peak, Recession,
Trough & Depressionthat repeat
themselves over time.
Economists note, however, that complete
business cycles vary in length. The duration
of business cycles can be anywhere from
about two to twelve years, with most cycles
averaging about six years in length.

EXPANSION PHASE
A phase of the business cycle when the economy
moves from a trough to a peak. It is a period when
business activity surges and gross domestic product
expands until it reaches a peak. Also known as an
"economic recovery."
An expansion is one of two basic business cycle phases.
The other is contraction. The transition from
expansion to contraction is termed a "peak.
Expansions last on average about three to four years
but have been known to last anywhere from 12 months
to more than 10 years. Much of the 60s was a time of
expansion which lasted almost nine years.





THE EXPANSION PHASE IS DEPICTED BY THE UPWARD SLOPING
SEGMENT OF THE CYCLICAL LINE POSITIONED ABOVE THE
STEADY GROWTH LINE.
EXPANTION RESULTS INTO TOTAL INVESTMENT,GROWTH IN
EMPLOYMENT,OUTPUT,INCOME AND DEMAND INCREASES
LEADING TO INCREASE IN SALES,PROFIT,INVESTMENT DEMAND
AND THE GENERAL PRICE LEVEL.
INVENTORY LEVEL RISES AND INTEREST RATES RISES DUE TO
RISING INVESTMENT DEMAND.
DUE TO RISING PRICE LEVEL,REAL INTEREST RATES ARE LOW.
THE PROFITABILITY IS HIGHER OF FIRMS DUE TO HIGHER
DIVIDENT DECLARATION.
IT LEAD TO RISE IN STOCK PRICES.
THUS DURING EXPANSION,THE REAL NATIONAL INCOME
STEADILY RISES.

EXPANSION PHASE
ECONOMIC ACTIVITY IN THE US, 19542000
EXAMPLES OF EXPANSION OF INDAIN ECONOMY
NARENDRA MODI
The man who promises to lift Asias
number-three economy from its
longest stretch of sub-five per cent
growth in a quarter-century.
THE DREAM OF NEW INDIA
1) 100 Smart Cities: Giving direction to Modi's vision of building multiple smart
cities in India, Jaitley said the government will aim to spend Rs 7060 crore for 100
smart cities.
2) Skill India Programme: Looking to harness the demographic dividend,
government will work on skill development of youth. The government announced
the launch of a national Multi-Skill programme called Skill India
3) Housing for all by 2022: Stating that the government is committed to
endeavour to have housing for all by 2022,government will extend additional tax
incentive on home loans to encourage people, especially the young, to own houses.
4) Swatchh Bharat Abhiyan: Moving towards NDA government's 'Swachh Bharat
Abhiyan', "Swachh Bharat Abhiyan, the need for sanitation is of utmost
importance."




5) Ganga cleaning: With focus on river linking study
The government also proposes to allocate Rs 2037
crore to clean up Ganga.
6) Solar & renewable energy: Jaitley announced
several initiatives for strengthening energy sector. A
plan proposed to take up Ultra Mega Solar Power
Projects in Rajasthan, Gujarat, Tamil and Laddakh. A
sum of Rs 500 crore is allocated for this purpose.
7) Promoting tourism: The budget proposes to create 5
tourist circuits around specific themes for which a sum
of Rs 500 crore has been set aside in the current
financial year.


THE DREAM OF NEW INDIA
E-COMMERCE
In 2012, Cross-border ecommerce sales reached $300
billion-, while global online trade is expected to soar
to $1.4 trillion by 2015, presenting multi-channel
retailers with limitless business opportunities for
international expansion. In China and the US alone,
half a billion online shoppers surf the web each day
for the best deals. Global acquirers can help retailers
with innovative solutions to overcome challenges
posed by serving a diverse audience with varying
consumer expectations, in multiple languages,
solutions which can make cross-border ecommerce
domestic and truly profitable.


PEAK OF BUSINESS CYCLE
PEAK
The economy stops growing [reached the top]
GDP reaches maximum.
Business cant produce any more.
Business cant hire any more.
Cycle begins to contract.


PEAK
An expansion, like a contraction, comes to
an end.
It is a end of an expansion, and the onset of
a contraction
A peak is the highest level of the business
cycle, might seem like a good thing, it really
has a down side.
A peak means that the expansion has
ended and that a contraction is about to
begin.


PEAK
The Peak phase is when the economys
expansion slows
Its usually the last quarter before the
recession starts
Its is when inflation rears ugly head.
IMPORTANT THINGS
Dont quit the job you in
As peak is also starting of contraction as its
end of expansion
Jobs will become scarce
If you quit, you may not find another job



IMPORTANCE
When wages will be highest?
When will unemployment be at its lowest?
When business profits be highest?

Answer:-
When Business cycle
will be at its PEAK




RECESSION
In economics, a Recession is a business cycle contraction. It is a
general slowdown in economic activity.

Macroeconomic indicators such as GDP (gross domestic
product), investment spending, capacity utilization, household
income, business profits, and inflation fall, while bankruptcies
and the unemployment rate rise.
What is a Recession?
A drastic slowing of the economy. Where gross national or
domestic product has fallen in two consecutive quarters. A
recession would be indicated by a slowing of a nation's
production, rising unemployment and falling interest rates,
usually following a decline in the demand for money. A popular
distinction between recession and depression is: 'Recession is
when your neighbours lose his job; depression is when you lose
yours!


GRAPH
What causes it?
An economy which grows over a period of time tends to slow
down the growth as a part of the normal economic cycle.
A recession normally takes place when consumers lose
confidence in the growth of the economy and spend less.
This leads to a decreased demand for goods and services,
which in turn leads to a decrease in production, lay-offs and a
sharp rise in unemployment.
Investors spend less as they fear stocks values will fall and
thus stock markets fall on negative sentiment.


CAUSES
EXAMPLE
What Was The Great Depression of 1929?:
The Great Depression of 1929 was a
worldwide depression that lasted for 10 years. Its
kickoff in the U.S. economy was Black Thursday"
October 24, 1929, when 12.9 million shares of
stock were sold in one day, triple the normal
amount. Over the next four days, prices fell 23%.
This was known as the stock market crash of 1929.
Unemployment Reached 25% During the Great
Depression:
By 1933, the height of the
Depression ,Unemployment had risen from 3% to
25% of the nations workforce. Wages for those
who still had jobs fell 42%. GDP was cut in half,
from $103 to $55 billion.


Lehman Brothers Holdings Inc. (former NYSE ticker
symbol LEH) was a global financial services firm. Before
declaring bankruptcy in 2008, Lehman was the fourth-
largest investment bank in the US (behind Goldman Sachs,
Morgan Stanley, and Merrill Lynch), doing business in
investment banking, equity and fixed-income sales
and trading (especially U.S. Treasury securities),
research, investment management, private equity,
and private banking.
At 1:45AM on September 15, 2008, the firm filed
for Chapter 11 bankruptcy protection following the massive
exodus of most of its clients, drastic losses in its stock, and
devaluation of its assets by credit rating agencies. Lehman's
bankruptcy filing is the largest in US history,


LEHMAN BROTHERS
RECESSION IN US
The United States housing market correction possible
consequence of United States housing bubble and sub prime
mortgage crisis has significantly contributed to a recession.
U.S. employers shed 63,000 jobs in February 2008.
The unemployment rate of US grew to 8.5% in March 2009,
and there have been 5.1 Million job losses till March 2009
since the recession began in December 2007

THE IMPACTS IN INDIA ARE
Reduced liquidity in the Indian economy

Reduced industrial output

Reduced job opportunities

Stock Market is lingering in the bottom


Real estate market has started to take a beating

Inflation has increased

GDP has come down and the GPD forecast for the next two quarters are only
average.
Big populous countriesChina, India, Indonesiadid not tip into
recession; they merely suffered slower growth. Brazil and the Asian tigers
saw output fall but bounced back

Economics: What are the main reasons India survived the global
economic recession of 2008?
India's growth rate did decline. But India would also emerge as the
country with 2nd highest growth rate behind China. What are the main
reasons India 'survived the crash'?

What my knowledge of economics tells me is India being late in opening
it's doors till 1991 to globalization helped India a lot as it wasn't as much
dependent on US as many other countries. Also a high rate of savings -
with lesser dependence on banks- helped India survive the crash.
INDIA survived..
KINGFISHER
AIRLINES
STRIKE
LIQUOR
TROUGH AND DEPRESSION
Definition
Trough:-The stage of the economy's
business cycle that marks the end of a
period of declining business activity and the
transition to expansion.
Depression:-
a depression is a sustained, long-term
downturn in economic activity in one or
more economies. It is a more severe
downturn than a recession, inevitable part
of capitalist economy.


During depression, the rate of growth of economy
becomes negative and the national income begins
to fall. Unemployment levels rises rapidly due to
falling aggregate investment. The general price
level falls rapidly. Interest rates are very low;
however, demand for credit is also very low.
Numerous firms makes loses and stocks prices
begin to fall rapidly. At the lowest end of the
cyclical curve, the period of depression comes to
an end, which is called as Trough. Trough is the last
stage of both recession and depression.
After trough, recovery and expansion takes place


TROUGH AND DEPRESSION
1) The great Depression of 1929
The Great Depression was a severe worldwide economic
depression in the decade preceding World War II. The timing
of the Great Depression varied across nations, but in most
countries it started in 1930 and lasted until the late 1930s or
middle 1940s. It was the longest, deepest, and most
widespread depression of the 20th century.
In the 21st century, the Great Depression is commonly used as
an example of how far the world's economy can decline. The
depression originated in the U.S., after the fall in stock prices
that began around September 4, 1929, and became
worldwide news with the stock market crash of October 29,
1929 (known as Black Tuesday).
The Great Depression had devastating effects in countries rich
and poor. Personal income, tax revenue, profits and prices
dropped, while international trade plunged by more than
50%. Unemployment in some countries rose as high as 33%.


EXAMPLES
2)THE DEPRESSION IN ZIMBABWE

The economy of Zimbabwe Shrunk significantly after
2000, resulting in a desperate situation for the
country and widespread poverty and an 80%
unemployment rate. The participation from 1998 to
2002 in the war in the Democratic Republic of the
Congo set the stage for this deterioration by draining
the country of hundreds of millions of dollars.
Hyperinflation has been a major problem from about
2003 to April 2009, when the country suspended its
own currency. Zimbabwe faced 231 million per cent
peak hyperinflation in 2008. Zimbabwe has also
sustained the 30th occurrence of recorded
hyperinflation in world history. Labor market was
highly regulated, hiring a worker was cumbersome,
firing a worker was difficult and unemployment has
risen to 94%.

ZIMBAWBE'S GDP
CASH COW
DOG
COMPANY: MAHINDRA
SLICE
RECOVERY OF BUSINESS CYCLE
RECOVERY
An economic recovery is the phase of
the business cycle following a recession,
during which an economy regains and
exceeds peak employment and output
level increases.


RECOVERY
Time
L
e
v
e
l

o
f

b
u
s
i
n
e
s
s

a
c
t
i
v
i
t
y

The upswing part
of the cycle.
Real output in
the economy is
increasing
Unemployment
rate is declining



EXPANSION AND RECOVERY

WHY IS RECOVERY IMPORTANT IN AN ECONOMY?

PROBLEMS FACING AN ECONOMY RECOVERING FROM
RECCESSION
Low Consumer confidence.
Ineffectiveness of Monetary Policy.
Effectiveness of Fiscal Policy.
Deflation.
Hysteresis.
Supply side shocks.

HOW TO RECOVER FROM ECONOMY
To recover from a recession there needs to
be either a rise in AD or a readjustment in
prices and wages.
The banks can reduce the rate of interest
so that there will be more investment
which will lead to job opportunities.
The economists use a variety of indicators
to determine whether a recovery is in
progress.
A RECOVERY PEROID IS TYPICALLY CHARACTERIZED
BY
There is high level of growth in real gross
domestic product and hence the economy
becomes stronger.
Since more jobs are created there is
increase in employment.
More goods and services are supplied by
business, therefore there is increase in
corporate profits.


EXAMPLE
THE END
CREDITS :
KAREENA DUA
SAMKEET GADA
SHUBHAM KADU
DHAVAL BHATT
SHUBHAM MHATRE
TRISHA MEHTA
BHAVIK DESAI