Business cyclesby param

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business cycles explained as part of managerial economics subject

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Business cyclesby param

  1. 1. Business Cycles Presented by Dharma reddy Priya Laxmi Parameswarao Nawin Kumar MohammadAshraf Nishad
  2. 2. Business Cycles DefinedAccording to Haberler –The business cycle in general sense may be defined as alternative of periods of prosperity and depression of good and trade.The term business cycles refers to wave like fluctuations in aggregate economic activity particularly in national income, employment and output
  3. 3. FEATURE OF BUSINESS CYCLE• A trade cycle is self generating• It occurs periodically• It is a wave like movement• It results in a crisis, the downward movement is more sudden and violent than that of upward
  4. 4. Hypothetical Business Cycle Peak Real GDP per year Peak Trough Recession Recovery Time 4
  5. 5. Four Phases of a business cycle• Trough • Peak – The phase of the ― The phase of the business cycle in which real GDP business cycle during reaches its minimum which real GDP reaches after falling during a recession its maximum after rising during a recovery• Recovery • Recession – An upturn in the business cycle during – 2 consecutive quarters which real GDP rises of negative economic growth.
  6. 6. Characteristics of trough• In this period, bank credit is stopped and consequently money supply also is reduced• All construction activities come to an end• The production of capital goods fall to low levels• The fall in prices distorts the relative price structure• Many firms will be closed down on account of accumulated losses
  7. 7. Characteristics of Recovery• The business people will now find that the situation better, to start production• The producers order for new machinery or repair the old machinery• When the workers get employment, they get salaries and wages• The suppliers of raw material get revenue
  8. 8. Characteristics of peak• Money wages rise, profit increase and the interest rates also go up• The demand for bank credit also increases• The resource owners also increase price of resources• Everywhere there is jubilation
  9. 9. Characteristics of Recession• There is a fall in the level of income and output• Unemployment start increasing• There is a fall in income , expenditure, prices and profit• Decline in bank credit• Pessimism starts prevailing among investors
  10. 10. CLASSIFICATION OF BUSINESS CYCLE• Major business cycles• Minor cycles• Minor cycles• Building cycles
  11. 11. Measures to control the evil effects of business cycle by business firms• Preventive measures – Preventive measures refers to those measures which would be adopted particularly during the period of expansion for regulating business and to avoid unwise experience in the future• Relief measures - Relief measures refer to those measures which are formulated to help in the recovery of a firm during the period of contraction

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