BUSINESS CYCLE

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BUSINESS CYCLE 

Business Cycle: 

                           The term business cycle/economic cycle/boom-bust cycle refers to economy-wide fluctuations in production, trade, and general economic activity. Simply, the business cycle is the upward and downward movements of levels of GDP and refers to the period of expansions and contractions in the level of economic activities.


Types of Business cycle

1. The Minor Cycle: These are the short-term trade cycles named after Joseph Kitchin. This cycle is the regular 40-month fluctuation in prices, production, and employment.

2. The Major Cycle: This has been emphasized as the fluctuation of business activity between successive crises. This is also known as “The Long Jugler Cycle.” Developed by French economist Clement Jugler, showed that the periods of prosperity, crisis, and liquidation followed each other always within a span of the average of 9 to 10 years. Each major cycle is made of 2 or 3 minor cycles

3. The Very Long Period Cycle: This is also known as Kondratieff Cycle. This was propounded by N. D. Kondratieff the Russian economist in the year 1925. He has written that there are longer waves of cycles of more than 50 years duration.

4. Kuznets Cycle: This type of business cycle was propounded by the famous American economist Professor Simon Kuznets. His view was that the secular swing of the cycle generally occurs in between 7 to 11 years and this can show effect within that period.

5. Building Cycles: Economic fluctuations of a longer duration than the business cycles have taken place in the building construction activities. These cycles run from 15 and 20 years and on average to 18 years.

Phases in the business cycle:-

  1. Expansion/recovery/prosperity.
  2. Peak/boom.
  3. Recession/depression/Contraction.
  4. Trough/slump.

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