The document defines the business cycle as alternating periods of economic prosperity and depression. It describes the main features as being pervasive, recurrent but not periodic, and persistent. The phases of the business cycle are growth, peak, recession, trough, and recovery. It provides details on the characteristics and causes of each phase, such as growth involving increasing sales, production, employment, and income, while recessions involve declining output, income, employment, and trade. The business cycle is caused by factors like interest rates, housing prices, and consumer confidence, and governments try to control it through fiscal, monetary, and other economic policies.

2. Definition
“The business cycle in the general sense may be defined as
an alternation of periods of prosperity and depression of
goods and service”
- Harberler
In simple words “ A business cycle represents the
different stages which every business organisation
faces throughout its tenure, in the form of a wave like
structure

3. MAIN FEATURES
Pervasive in nature,
Recurrent but not periodic,
Persistent
Each cycle differs in length and severity

4. Phases of the Business Cycle
The phases of the business cycle are
known as:
Growth
Peak
Recession
Trough
Recovery

5. While fluctuations are in practice highly irregular, the most common
illustration shows a standard periodic cycle.

6. Growth
 Can be viewed as a “virtuous cycle”
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Sales
Increase
Production
Increases
Employment
Increases
Income
Increases

7. Causes of Growth
Include the following:
 business is newly formed
 more branches of the business are opened
 need for the product rises or is created
 introduction of new or improved product
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8. The Peak
 Accounts for the time when business activity has reached a
maximum, including:
 full employment
 level of output at or near capacity
 Often causes higher prices
 Acts as a transition point from growth to recession
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9. Causes for the Peak
Include the following:
 boom in the economy
 sudden need or want of the product
 availability of product rises
 the product is unique for the time being
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10. Recession
• May also be referred to as contraction
• Follows the peak
• Is commonly defined as two consecutive quarterly
declines in GDP
• Accounts for a decline in:
– total output
– income
– employment
– trade
10

11. Recession
 Occurs in all companies
 Rarely causes price level to fall
unless severe and prolonged, as in a depression
 Differs from depression
 depression occurs when GDP drops by more than
10% while a recession experiences a less severe drop
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12. Causes of Recession
 Include the following:
 product falls behind in usefulness, technology or want
 value of the dollar declines
 customer debt
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13. The Trough
 Marks the lowest levels during a recession
 Accounts for the least amount of output and
employment
 May be short or long lived
 Ends the period of recession and begins growth
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14. Causes of the Trough
 Include the following:
 the product is severely outdated
 need or want for the product is at an all time low
 the product has not changed over time
 many customers already possess the product
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15. The Recovery
• Turning point from depression to expansion
• Steady rise in output, income, employment, prices and
profits
• Banks expand credit
• Revival slowly emerges into prosperity, and the business
cycle is repeated

16. Causes of Business Cycle
Interest rates
Changes in house prices
Consumer and business confidence
Multiplier effect
Accelerator effect
Inventory cycle

17. Measures of Controlling Business
Cycle
 Fiscal policy
 Monetary policy
 State Control of Private Investment
 International Measures
 Reorganization of Economic System