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Business cycle
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- 2. BUSINESS CYCLE • Businesscycle is also known as economic cycle or trade cycle. • It refers to the phenomenon of cyclical booms and depression. • In business cycle there are wave like fluctuations in employment, income, price-level and output.
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- 5. EXPANSION DURING A PERIODOF EXPANSION: • Wages increase • Low unemployment • People are optimistic and spending money • High demand for goods • Business starts • Easy to get a bank loan • Business make profits and stock prices increases
- 6. PEAK or PROSPERITY WHENTHE ECONOMY CYCLE PEAKS: • The economy stops growing(reached the top) • GDP reaches maximum • Business can’t produce any more or hire more people • Cycle begins to contract
- 7. CONTRACTION DURING A PERIODOF CONTRACTION: • Business cut back production and layoff people • Unemployment increases • Number of jobs decline • People are pessimistic (negative) and stop spending money • Banks stop lending money.
- 8. RECESSION and DEPRESSION •A prolonged contraction is called a recession(contraction for over 6 months) • A recession of more than one year is called a depression
- 9. MEASURES TO CONTROL BUSINESSCYCLE • Monetary policy- the central bank can practice the monetary measures. • Fiscal measures- budgetary measures, taxation, public expenditure and public debt. • Price control- prices should be kept under check. • Reduction of economic inequalities.
- 10. CONCLUSION Though the governmenthas taken a number of steps, business cycle is not so easy to be controlled. The business cycle seems to have become an almost natural feature of the present economy. However, to get desirable results both monetary and fiscal policies should be combined and implemented effectively.