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    Business Cycle

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    baecmt22001
    The document discusses the business cycle which refers to fluctuations in economic activity like GDP, employment and inflation over time. It describes the different phases of the business cycle as expansion, peak, recession, depression and trough. It also discusses some key causes of the business cycle like changes in demand, investments and money supply.

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    Business Cycle

    Uploaded by

    baecmt22001
    11 views3 pages
    The document discusses the business cycle which refers to fluctuations in economic activity like GDP, employment and inflation over time. It describes the different phases of the business cycle as expansion, peak, recession, depression and trough. It also discusses some key causes of the business cycle like changes in demand, investments and money supply.

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    A brief of business cycle

    Original Title

    Business cycle

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    The document discusses the business cycle which refers to fluctuations in economic activity like GDP, employment and inflation over time. It describes the different phases of the business cycle as expansion, peak, recession, depression and trough. It also discusses some key causes of the business cycle like changes in demand, investments and money supply.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    11 views3 pages

    Business Cycle

    Uploaded by

    baecmt22001
    The document discusses the business cycle which refers to fluctuations in economic activity like GDP, employment and inflation over time. It describes the different phases of the business cycle as expansion, peak, recession, depression and trough. It also discusses some key causes of the business cycle like changes in demand, investments and money supply.

    Copyright:

    © All Rights Reserved
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    The Business Cycle

    Akanksha Yadav
    BAECMT22001

    Business cycle in layman language is a cycle of business and this business


    includes input, employment and inflation of a country. This cycle gives an appropriate
    idea of how an Economy of a country is working. It is influenced by many factors such
    as consumers’ spending, fiscal and monetary policies, technological advancements and
    investment etc. of a country. Although the term business cycle is misleading in some
    ways because a cycle is a periodically occurring event, it is not the case with business
    cycles because recession period can occur even for six or sixteen months, whereas the
    expansion period can stay for a year or months also. So a more appropriate term that
    can be used instead of the business cycle is ‘Short-term economic fluctuations’.

    The full employment level of output, which naturally tends to grow as the population
    increases and new technologies are discovered, can be maintained forever, however,
    because disturbances to the economy of one short or another push the economy above
    or below full employment.

    Business cycle consists of expansion, peak, recession, depression and trough.


    2

    Expansion: This phase is characterized by increasing GDP, higher employment


    levels, increased consumer spending, and growing business investment. It is typically
    accompanied by low unemployment rates and rising consumer confidence.

    Peak: During this phase, the economy reaches its maximum level of output and
    employment. It is often characterized by high levels of consumer spending and
    optimism about future economic prospects.

    Recession: This phase involves a decline in economic activity following the peak.
    Unemployment rises, business investment declines, and consumer confidence falls.

    Trough: Economic activity reaches its minimum level. It marks the end of the
    recession and the beginning of recovery. Consumer and business confidence begins to
    improve.

    Causes of a Business Cycle:

    1.Change in demand- When demand in an economy increases, firms start producing


    more, resulting in more output, more employment, more income, this leads to expansion
    in an economy and Vice-versa. But excessive demand may also cause inflation.

    2.Change in investments- The investment changes on the basis of many factors such as
    rate of interest and expected profit in an economy. The increased investment will lead to
    higher employment and the economy grows towards expansion and if investment falls it
    causes trough.
    3

    3.Supply of money- An increase of money in the market causes growth and expansion
    but excess supply of money may also cause Inflation. Whereas, decrease of money
    supply will initiate a recession in the economy.

    Other external factors also cause business cycles to occur such as war, population
    growth, natural disasters etc.

    Implications of the Business Cycle:

    For Businesses: The business cycle affects firms' sales, investments and overall
    business performance. Businesses need to adapt their strategies and operations to
    navigate through different phases of the cycle.

    For Policymakers: Governments and central banks use fiscal and monetary policies to
    stabilize the economy and tackle the negative impacts of recessions. The motive of
    policy responses are economic growth, control inflation, and reduce unemployment
    during recession.

    Understanding the Business cycle is important for business, policy makers ,


    investors and individuals to make the right decision in order to make profit itself. It gives
    insight into dynamics of the economy and helps anticipate future economic challenges
    and opportunities.

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