Question

what the meaning of business cycle , what are the main phases business cycle , what are the two turning pint a business cycle go through ?

Answer 1

Business cycle : The alternative periods of expansion and contraction in economic activity is called business cycle.The fluctuations in economic activities are termed as phases of business cycles.

Main phases of business cycle are :

1. Expansion : The line of a cycle that moves above the steady growth line represents the expansion phase of a business cycle. In the expansion phase,there is an increase in various economic factors such as production, employment , output ,wages , profits ,demand and supply.

2. Peak : The growth in the expansion phase eventually slows down and reaches to its peak. This phase is known as peak phase. It refers to the phase in which the increase in growth rate of business cycle achieves its maximum limit and do not increase further.

3. Recession : When the decline in the demand of products becomes rapid and steady ,the recession phase takes place.

4. Trough : During this phase, the economic activities of a country decline below the normal level. In this phase, the growth rate of an economy becomes negative. There is rapid decline in income and expenditure in trough phase.

The two turning points a business cycle go through are Peak (Upper turning point) and Trough (Lower turning point).