Upload
bhushan
View
219
Download
1
Embed Size (px)
Citation preview
7/29/2019 Eeb - Business Cycle
1/12
GOOD AFTERNOON
BUSINESS CYCLE
7/29/2019 Eeb - Business Cycle
2/12
BUSINESS CYCLE
Business Cycle refers to the fluctuations(moving up & down) of the business
activities in a country.
Fluctuations
in production, employment,
and incomes of the people.
Fluctuations - maximum if government
role is minimal. Fluctuations Industrially advanced
countries.
7/29/2019 Eeb - Business Cycle
3/12
Definition:
KEYNES: Business cycle is a trade cycle
composed of good trade changing with the
period of bad trade.
Good trade - which has rising prices and
less of unemployment.
Bad trade - which has less or falling prices
and more of unemployment.
7/29/2019 Eeb - Business Cycle
4/12
Features o f Business Cyc le:
Trade cycle occurs Periodically in a regular
fashion (but time limit is not certain). Trade Cycle is Comprehensive - easily
understood, (if in one industry then all). -
Durable/non-durable.
Trade Cycle are like Waves in the sea.
upand downs output, employment and income.
(profit fluctuates) International in character.
Trade Cycle has important feature
Cyclicaldisturbances - Movement from prosperity
stage to depression short duration
recession to recovery long duration.
7/29/2019 Eeb - Business Cycle
5/12
Classification of Business cycles:
Periodically
time period is different.
4 to 5 years / 9 to 10 years.
Short business cycle: short waves up to 40
months. Kitchin Cycles Prof. Joseph Kitchin
Britain and USA.
Long business cycle: Long waves.
Kondratieff Cycles Prof. Kondrateiff
England and France long duration of 60
years - between 1780-1920.
7/29/2019 Eeb - Business Cycle
6/12
PHASES OF TYPICAL
BUSINESS CYCLEDEPRESSION:
First stage of a business cycle. Longer period of
business activity, 3 - 4 yrs (far below than normal).
Sharp reduction of production,
mass unemployment,
low employment,
falling prices,
falling profits, low wages,
contraction of money supply, business failure.
Business activity standstill manufacturing firms
losses, shut down, hit agricultural commodities,-
banks collapse.
7/29/2019 Eeb - Business Cycle
7/12
PHASES OF TYPICAL
BUSINESS CYCLE
RECOVERY (Reviv al):
Second stage - Starts when the point of
depression ends,
Demand for basic consumer goods still exists.
No Stocks - production starts slowly - workers
get employment,
Banks lend money, slow raise in prices.
Revival starts by government expenditure,
investment in new regions, changes in
production techniques, etc.
7/29/2019 Eeb - Business Cycle
8/12
PHASES OF TYPICAL
BUSINESS CYCLE
PROSPERITY (Full Emplo ym ent)
Third Stage increased production, high
capital investment in basic (important)
industries.
Expansion of bank credit,
High prices (demand inelastic) high profits
high capital formation FULL EMPLOYMENT,
Optimism among businessmen andindustrialists.
7/29/2019 Eeb - Business Cycle
9/12
PHASES OF TYPICAL
BUSINESS CYCLE
BOOM (Over Ful l Employment) Fourth Stage Rapid increase in business activity,
High stocks and commodity prices, high profits,
overfull employment.
Continuation of investment after full employment
raise in prices (inflation in economy).
Number of jobs more than number of workers.
Over optimism - Carries the seeds of self-
destruction (losses) , Problems in various sectors, lack of factors of
production will led to recession.
7/29/2019 Eeb - Business Cycle
10/12
PHASES OF TYPICAL
BUSINESS CYCLE
RECESSION : Fifth Stage Falling stage of boom period is
recession.
Feeling of over-optimism (more than sufficient),
create problems in business enterprises, Prices collapse,
slowly unemployment starts,
Initial in capital goods unemployment begins
spreads to other sectors/industries,
Fall in income, expenditure, prices and profits.
Land into depression.
7/29/2019 Eeb - Business Cycle
11/12
Business Cycles
DIAGRAM:______.
Business cycles are outdated.
Cyclical fluctuations are predicted in
advance and suitable steps are taken.
7/29/2019 Eeb - Business Cycle
12/12
Thank You