Days Special

Topic:- Business Cycle

According to W.C.Mitchell
Business Cycle are a species of fluctuation in the economic activities of organised communities The adjective business restrict the concept of fluctuation in activities which are systematically conducted on a commercial basis. The noun cycle bars out, fluctuations which do not recur with a measure of regularity..

In simply Words Business Cycle

Business Cycle implies a wave-like fluctuation in aggregate economic activity Particularly in national income, employment and output.

According to the Mitchell There are four phases of a typical business cycle..

1. 2. 3. 4.

Contraction Revival Expansion Recession

Recession contraction

contraction

expansion

Revival

Revival

Recession contraction

contraction

expansion

Revival

Revival

Contraction:- A period of contraction is characterized by the low level economic activity. It also period of high employment, low income and falling price and profit. There will be general business pessimism. The volume of employment and output goes on falling The Economy of the U.S.A longest depressionone of 65 months duration(1873-1879) and another of 44 months duration (1929 1933)..

Recession contraction

contraction

expansion

Revival

Revival

Revival:-- Revival beings after the lowest point the depression is reached. During this phase of the business cycle, the forces gather to increases employment, income and prices.
The organisers starts investing more, as a result of which income, employment and output starts increasing..

Recession contraction

contraction

expansion

Revival

Revival

Expansion:-- Recovery gives place to expansion or prosperity. prosperity is a period which is charecterised by a very high marginal efficiency of capital. Investment, both in consumer and capital goods industries, increased cumulatively. Income, employment, output and prices goes on rising rapidly. The level of employment become very high. The U.S.A experienced the longest period of prosperity between 1923 and 1929..

Recession contraction

contraction

expansion

Revival

Revival

Recession:-Expansion cannot continue indefinitely. It gives place to, recession. During this phase of business cycle, the business optimism is replaced by the business pessimism. The enterpreneurs fails to realise the expected rate of profit. Banks try to contract credit unemployment sets in the capital goods industries. Recession in the capital goods industries also spread to the other industries in the economy. Income employment, output and price go on falling There was a very sever recession in U.S economy between 1957 and 1958..