Business cycles refer to alternating periods of economic growth (expansion or prosperity) and economic decline (contraction or recession) that characterize market economies. There are four phases of a business cycle: peak, trough, recovery, and recession. Characteristics include periodic and self-generating fluctuations in aggregate economic indicators like GDP, employment, and output. Business cycles can be classified as major, minor, or building cycles. Firms employ preventive and relief measures to control the negative effects, such as regulating expansion and helping recovery during contraction.

1. Business Cycles
Presented by
Dharma reddy
Priya Laxmi
Parameswarao
Nawin Kumar
MohammadAshraf
Nishad

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. 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. Hypothetical Business Cycle
Peak
Real GDP
per year
Peak
Trough
Recession Recovery
Time 4

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. 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. 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. 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. 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. CLASSIFICATION OF BUSINESS CYCLE
• Major business cycles
• Minor cycles
• Minor cycles
• Building cycles

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