Define Business Cycle. Elucidate characteristics and phases of Business Cycle .

Business cycle:

Business cycle is also called Trade Cycle. The business is never steady. There are always ups and downs in economic activity. This cyclical movement both upwards and downwards iswcommonly called Trade Cycle. This is a wave like movement in regular manner in business cycle. In business, there are flourishing activities, which take economy to prosperity and growth whereas there are periods when there is recession, which leads to decline in the employment, income and output. When the economy goes into downswing then there is a stage of recovery to reach a new boom.

Definition and Characteristics of Business Cycle:

Keynes : Trade Cycle is composed of periods of good trade characterized by rising price and low unemployment percentage altering with periods of bad trade characterized by falling price and high unemployment percentage. To put in simple words:-

Business cycle is a fluctuation of the economy characterized by periods of prosperity followed by periods of depression.

Definition and Characteristics of Business Cycle:

· The fluctuation are wave like movement and are recurrent in nature.

· Business cycle is characterized by waves of expansion and contraction. But these are not only two phased of business cycle. There are four phases of business cycle.

o Expansion

o Recession

o Contraction and

o Revival or Recovery

· The movement from peak to trough and again trough to peak is not symmetrical. According to Keyness, prosperity phases of business cycle comes to end fast but dip is gradual and slow.

· Business Cycle is self generating. Every phase has germs of the next phase, that is, expansion has the germs of the recession in it.

The Business cycle or Economic cycle refers to the fluctuations of economic activity about its long term growth trend. The cycle involves shifts over time between periods of relatively rapid growth of output (recovery and prosperity), and periods of relative stagnation or decline (contraction or recession). These fluctuations are often measured using the real gross domestic product. Despite being named cycles, these fluctuations in economic growth and decline do not follow a purely mechanical or predictable periodic pattern.