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A Presentation on Business Cycle

A Presentation on Business Cycle

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Published by Abhra Mukherjee
A presentation about business cycle
A presentation about business cycle

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Categories:Types, Business/Law
Published by: Abhra Mukherjee on Mar 09, 2013
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By Abhra Mukherjee Ankita Dutta Anuradha Tripathi Pallavi Sagar Sonal Kamble

employment…  Business cycle is an alternate expansion and contraction in overall business activity. as evident by fluctuation in measures of aggregate economic activity such as the gross product industrial production employment and income . prices. It is associated with fluctuation in economic activity like production.

investment an. roi. etc  Consumption of non-durable goods and services do not vary much  Profits fluctuate more than any other type of income . consumption. Business cycle operates periodically  Business cycle synchronic – affects all industries  Business cycle has both upward and downward  In business cycle fluctuations are recurrent in nature  Fluctuation not only in production but also in employment.

y PROSPERTY PROSPERTY B O O M SLUMP recession recovery recovery slump recession depression depression o x .

they are:  Depression  Recovery  Prosperity  Boom  Recession  Slump .There are 6 different stages or phases in business cycle .

business failures decline in output or decline in production  All construction activities come to stand still. low wages .  Capital goods industries are affected . falling profits . mass unemployment .falling prices . Period in which the business activity is far below normal  Characterized by sharp reduction of production .

 Production picks up slowly and gradually  Employment increases  There is a slow rise in prices and slow rise in profits  New investment takes place  Recovery initiated by new innovations . changes in production . It implies an increase business activity . slight improvement of economic activity . government expenditure .

 this stage is characterized by increase in production  high capital investment in basic industries  expansion of bank credit  high prices . high profits  new business enterprises  full employment .

factors of production become scarce with new rise in prices  industrialists begin to stay away from new projects and even stop expansion of existing units. highest competition . it is the phase of rapid expansion in business activity  it results in high stocks . high commodity prices  high profits and overfull employment. the number of jobs exceed the number of workers available (overfull employment)  boom is not as good as prosperity because it carries seeds of destruction . . high bank rate  the continuous investment results in sharp inflationary rise of prices  this causes a sharp rise in prices of production.

.  more business enterprises fail  prices collapse  building construction slows down and unemployment leads to fall in income .  once recession starts it goes on gathering momentum and finally assumes the shape of depression  the 1957-58 recession in USA was severe. prices and profits.expenditure. banks begin to panic and begin to withdraw loans from business enterprises .

 Less production  Less investment  Less employment .

.Cause of business cycle There may be three reasons for business cycle fluctuation Nominal demand shocks (due to variation in money supply)  Real demand shocks (shifts in consumption . investment or fiscal policy not related to monetary policy)  Demand shocks.

Control of Business cycle Business cycle can be controlled by the following ways: monetary policy  fiscal policy  automatic stabilisers .

open market operation. CLR. SLR moral suasion. may evolve a suitable monetary policy to deal with this situation  The undue expansion of money supply could be checked by a proper check against note issued  To control the bank credit the central bank could use the various measures like bank rate. ..Monetary policy  The Govt.

parks. causals . should raise the existing taxes. that will increase employment such as construction of roads . . levy new taxes and reduce its expenditure on public works.  the Govt.Fiscal policy 3 main measures of fiscal policy used by Govt. schools. are  taxation  spending  borrowings During downswing the Govt. should initiate public works project .  when the economy recovers the Govt. etc. should not levy any taxes and reduce the existing taxes.

 another built in stabiliser is the UNEMPLOYMENT INSURANCE. . During depression the Govt. during this period of prosperity. lowers taxes and pays unemployment allowances to unemployed persons making available more money to people. at high rates.Automatic stabilisers  its an economic shock absorber that stabilises the the cyclical fluctuation. the employers pay taxes to Govt. this tax is so devised that people in higher income are taxed at a higher rate .  one such device is the FEDERAL PROGRESSIVE INCOME TAX in USA & INDIA. so in upswing when incomes are rising people would pay more taxes.

 Fluctuation in demand is major source of business cycle volatility.Co –movement characterizes them. .Some facts about business cycle  Different economies will experience different shocks . .and magnitude and duration of business cycles may vary .e.display similar behavior at roughly same time.  It is aggregate phenomenon .many economic variable s from different sectors and regions of the economy and also from different countries .but it is inevitable. i.

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