The presentation is related about the business cycle, types and phases of business cycle and conclusion.

2. INTRODUCTION

3. Business cycle or trade cycle is a part of
the capitalist system. It refers to the
phenomenon of cyclical boom and
depressions.
In a business cycle, there are wave-like
fluctuations in aggregate employment,
income, output and price level.

4. The Business cycle in the general
sense may be defined as an
alternation of periods of prosperity
and depression of goods and bad
trade.

5. DEFINITION GIVEN BY SOME
ECONOMIST
According to J.M.Keynes “A trade
cycle is composed of periods of good
trade characterized by rising prices
and low unemployment percentages
with periods of bad trade characterized
by falling prices and high
unemployment percentages”

6.  According to Estey ”Cyclic fluctuations are
characterized by alternating waves of
expansion and contraction. They do not
have a fixed rhythm, but they are cycles in
that the phases of contraction and
expansion recur frequently and in fairly
similar patterns.”

7. TYPES OF
BUSINESS CYCLE

8. • The Short Kitchin Cycle
• The Long Jugler Cycle
• The Very Long Kondratieff Cycle
• Building Cycle
• Kuznets Cycle

9. THE SHORT KITCHIN CYCLE
It is also known as the minor cycle which is of
approximately 40 months duration. It is
famous after the name of British economist
Joseph Kitchin .He came with a conclusion
on the basic of his research that a major
cycle is composed of two or three minor
cycle of 40 months. He came to the
conclusion that a major cycle is composed
of 2 or 3 minor cycle of 40 months.

10. THE LONG JUGLER CYCLE
 This cycle is also known as the major cycle. It
is defined “As the fluctuation of business
activities between successive crises”. In 1862
Clement Jugler, French economist showed
that periods of prosperity, crises and
liquidation followed each other always in the
same order. Later economist have come to
the conclusion that a Juger cycle’s duration is
on the average 9 and ½ years.

11. THE VERY LONG KONDRATIEFF
CYCLE
 N.D. Kondratieff, the Russian economist,
came to the conclusion that there are longer
waves of cycles of more than 50 years
duration, made of 6 Juger cycle. A very long
cycles has come to be known as the
Kondratieff wave

12. KUZNETS CYCLE
 Simon Kuznets, propounded a new type of
cycle, the secular swing of 16-22 years
which is so pronounced that it dwarfs the 7-
11 years into relative insignificance. This is
known as Kuznets cycle.

13. BUILDING CYCLE
 Another type of cycle relates to the
construction of buildings which is of fairly
regular duration. Its duration is twice that of
the major cycle and is on an average of 18
years duration. Such cycle are associated
with the name of Warren and Pearson.

14. FEATURES OF
BUSINESS CYCLE

15.  Business cycle occur periodically – they do
not show same regularity , they have some
distinct phases such as expansion , peak ,
contraction or depression and through .
Further the duration of cycles varies a good
deal from minimuxm of two years to a
maximum of 10 to 12 yrs.

16.  It has been observed that fluctuation occur
not only in level of production but also
simultaneously in other variables such as
employment, investment, consumption, rate
of interest, and price level.

17.  Another important feature of business cycle
is that investment and consumption of
durable consumer goods such as cars
house refrigerator are affected most by
cyclic fluctuation.

18.  Lastly business cycles are international in
character . i.e. once started in one country they
spread to another countries through trade
relation between them . For example , if there is
a recession in the USA which is a large importer
of goods from other countries will cause a fall In
demand for imports from other countries whose
export would be effected causing recession in
them too. Depression of 1930s in USA in Great
Britain submerged the entire capital world.

19. PHASES OF A
BUSINESS CYCLE

20. Recession
ContractionRecovery
Expansion

22. These phases are recurrent and uniform in
the case of different cycle. But no phase has
definite time interval. Starting from the
lowest, a cycle passes through a recovery
and prosperity phase, rises to the peek,
declines through a recession and
depression phase and reaches to the lowest
point.

23. A. RECOVERY
 During the period of recovery, there are
expansions and rise in economic activities.
When demand starts rising, production
increases and this causes an increase in
investment. There is a steady rise in output,
income, employment, prices and profits. The
businessmen gain confidence and become
optimistic (Positive). This increases
investments. The stimulation of investment
brings about the recovery of the economy

24. FEATURES OF RECOVERY
 Increase in Demand for durable Consumer goods.
 Production/Output Increases.
 Employment Increases.
 Income increases.
 Price level increases.
 Optimistic environment.

25. B. PROSPERITY
 In the prosperity phase, demand, output,
employment and income are at high level. They
tend to raise prices. But wages, salaries,
interest rate, rentals and taxes do not rise in
proportion to the rise in prices. The gap b/w
prices and costs increases the margin of profit.

26. FEATURES OF PROSPERITY
 Employment is at its maximum level.
 Price level is at maximum point
 Output/Production is at its maximum level.
 Turning point. i.e. from prosperity phase to
recession

27. C. RECESSION
 The turning point from prosperity to depression is
termed as Recession Phase.
 During a recession period, the economic activities
slow down. When demand starts falling, the
overproduction and future investment plans are
also given up. There is a steady decline in the
output, income, employment, prices and profits.
The businessmen lose confidence and become
pessimistic (Negative). It reduces investment.

28. FEATURES OF RECESSION
 Decrease in Demand for durable Consumer
goods.
 Production/Output Declines.
 Employment decreases.
 Investment declines.
 Income decreases.
 Worried Environment

29. D. DEPRESSION
 Recession merge into depression when there is a
general decline in economic activity. There is
considerable reduction in the production of goods
and services, employment, income, demand and
prices. The general decline in economic activity
leads to a fall in bank deposits.

30. FEATURES OF DEPRESSION
 Employment is at its lowest level.
 Price level is at lowest point.
 Output/Production is at its lowest level.
 Turning point. i.e. from depression phase to
recovery.
 Demand for durable goods is at its lowest
level.

31. FACTORS CAUSING
BUSINESS CYCLE

32. Business
Cycle
External
Factors
Internals
Factors

33. EXTERNAL FACTORS
 War:-
During war days all the available resources are
utilized for the production of weapons which greatly
affect the product of both capital and consumer
goods.
 Postwar Period:-
In the postwar period the level of consumption and
investment goes upwards. Both the government
and individuals involves in the contracture (houses,
roads, bridges etc) due to this economic activities,
output, income, and employment goes up.

34.  Scientific Development:-
Every day new products comes to the markets
like mobile, laptop, etc. These products require
a huge amount of investment through which
new technology of production can be adopted.
All this increases, employment and profit and
plays an important role in the revival of
economy.
 Surplus, Exports and Foreign Aid:
Surplus, exports, and foreign aid raises the level
of consumption and investment spending which
helps in increasing output, income, and
employment level.

35.  Weather:-
It is one of the causes of business cycle. It is
an important factor which causes economic
activities. If any year weather is good the
output of agricultural sector will goes
upwards.
 Population Growth Rate:-
It is one of the factor of business cycle. If the
population growth rate is higher than the
economic consumption, expenditure and
saving will be low.

36. INTERNAL FACTORS
 Bank Credit :-
According to Hawtery, cyclical fluctuation are caused
by expansion and contraction of bank credit. These
in turn leads to changes in the demand for money
on the part of producers & traders. Credit is
expanded or reduced by the bank lowering or
raising the rate of interest or by purchasing and
selling of securities to traders.

37.  Over-Saving or Under-Consumption:-
According to economists like Hobson, Foster and
Douglas, business cycles are caused by over
saving or under consumption. They argue that wide
disparities of income and wealth leads to
depression in the country. The rich people are not
able to spend their entire income. So they save
more and invest more in producing consumer
goods. On the other hand, the poor people have
low income or wages. As a result, their demand for
consumer goods is low which means that there is
under-consumption.

38.  Over-Investment:-
According to Hayke, it is bank loan which leads to
over investment in capital goods industries relative
to consumer goods industries that ultimately brings
depression in the economy. When the total money
supply exceeds the amount of voluntary saving, it
leads to increase in the investment activity and
ultimately to a boom.

39.  Psychological Causes:-
According to Pigou, the alternating waves of “over
optimism” and “over pessimism” are the sole
causes of the industrial fluctuation. He traces
cyclical fluctuation to the tendency of business to
react excessively to the changing conditions of the
economy.

40. FEATURES OF
BUSINESS CYCLE

41.  Movement in Economic Activity : A trade cycle is
a wave-like movement in economic activity showing
an upward trend and a downward trend in the
economy.
 Periodical : Trade cycles occur periodically but
they do not show the same regularity.
 Duration : The duration of trade cycles may vary
from a minimum of 2 years to a maximum of 12
years.

42.  Dynamic : Business cycles cause changes in all
sectors of the economy. Fluctuations occur not only
in production and income but also in other variables
like employment, investment, consumption, rate of
interest, price level, etc.
 Phases are Cumulative : Expansion and
contraction in a trade cycle are cumulative, in
effect, i.e. increasing or decreasing progressively.
 International Nature : Trade Cycles are
international in character. For e.g. Great
Depression of 1930s.