Question

what is business cycle ?

Answer 1

When the GDP of a nation moves upward or downward along its steady line growth, then it is known as Business Cycle. There are four phases of business cycle in the economy are:

a. Expansion: When growth in economy is higher than steady growth line, then economy experiences expansion. Production, emloyment and income increases in the economy.

b. Peak: When growth rate in the economy is maximum, then there is peak. Output is at potential level, employment is also at maximum and income is also at the potential level.

c. Recession: Gradual decline in demand in economy and production, employment and income are decreasing.

d. Trough: Economic activities are below normal and growth is negative, production and employment decreases to its lowest level.

e. Recovery: Growth rate starts improving and production increases, output and employment also starts increasing.

Thus, there are different phases if business cycle.