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    Business Cycles and Theories

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    Swaroop Ranjan Baghar
    The business cycle refers to the regular fluctuations in economic activity between periods of expansion and contraction. During an expansion or boom, output and employment increase, while a contraction or recession is a period of declining output and employment. A prolonged and deep recession may become a depression. Two prominent theories that attempt to explain the causes of business cycles are the monetary theory, which cites the expansion and contraction of bank credit and interest rates as central causes, and the innovations theory, which points to innovations as the driving force behind cycles in modern economies.

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    Business Cycles and Theories

    Uploaded by

    Swaroop Ranjan Baghar
    48 views6 pages
    The business cycle refers to the regular fluctuations in economic activity between periods of expansion and contraction. During an expansion or boom, output and employment increase, while a contraction or recession is a period of declining output and employment. A prolonged and deep recession may become a depression. Two prominent theories that attempt to explain the causes of business cycles are the monetary theory, which cites the expansion and contraction of bank credit and interest rates as central causes, and the innovations theory, which points to innovations as the driving force behind cycles in modern economies.

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    The business cycle refers to the regular fluctuations in economic activity between periods of expansion and contraction. During an expansion or boom, output and employment increase, while a contraction or recession is a period of declining output and employment. A prolonged and deep recession may become a depression. Two prominent theories that attempt to explain the causes of business cycles are the monetary theory, which cites the expansion and contraction of bank credit and interest rates as central causes, and the innovations theory, which points to innovations as the driving force behind cycles in modern economies.

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    Download as PPT, PDF, TXT or read online from Scribd
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    48 views6 pages

    Business Cycles and Theories

    Uploaded by

    Swaroop Ranjan Baghar
    The business cycle refers to the regular fluctuations in economic activity between periods of expansion and contraction. During an expansion or boom, output and employment increase, while a contraction or recession is a period of declining output and employment. A prolonged and deep recession may become a depression. Two prominent theories that attempt to explain the causes of business cycles are the monetary theory, which cites the expansion and contraction of bank credit and interest rates as central causes, and the innovations theory, which points to innovations as the driving force behind cycles in modern economies.

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    Business Cycles and Theories

    Business Cycle

    The business cycle is the cycle of


    short-term ups and downs in the
    economy.
    Expansion and Contraction: the Phases
    of Business Cycle
    • An expansion, or boom, is
    the period in the business
    cycle from a trough up to a
    peak, during which output
    and employment rise.
    • A contraction, recession,
    or slump is the period in the
    business cycle from a peak
    down to a trough, during
    which output and
    employment fall.

    A prolonged and deep recession becomes a depression


    Business Cycle Theories

    • Monetary Theory

    • Innovations Theory
    Monetary Theory

    According to this theory, expansion


    and contraction of bank credit are
    the central causes of business
    cycles, and bank credits affects
    business operations through the rate
    of interest.
    Innovations Theory

    • This theory makes innovations the


    central cause of occurrence of
    business cycles in modern industrial
    economies.

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