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Business Cycles
Page 2


Business Cycles
Business Cycle
?
Shows the periodic up and down movements in 
economic activities. 
?
Economic activities measured in terms of 
production, employment and income move in a 
cyclical manner over a period of time. 
?
Cyclical movement is characterized by 
alternative waves of expansion and contraction. 
?
Associated with alternate periods of prosperity 
and depression. 
Page 3


Business Cycles
Business Cycle
?
Shows the periodic up and down movements in 
economic activities. 
?
Economic activities measured in terms of 
production, employment and income move in a 
cyclical manner over a period of time. 
?
Cyclical movement is characterized by 
alternative waves of expansion and contraction. 
?
Associated with alternate periods of prosperity 
and depression. 
Characteristics of Business Cycles
?
Periodicity 
?
Wavelike movements in income and employment occur at 
intervals of 6 to 12 years. 
?
Gap between two cycles is not regular or predictable with 
certainty. 
?
Synchronism
?
Impact is all embracing, i.e. large sections of the economy 
experience the same phase. 
?
Happens because of interdependence of various sectors of the 
economy. 
?
Self Reinforcing
?
Due to interdependence in the economy, cyclical movements 
faced by one sector spread to other sectors in the economy; and 
from one economy to other economies. 
?
Thus the upward swing of the cycle is reinforced for further 
upward movement and vice versa.
Page 4


Business Cycles
Business Cycle
?
Shows the periodic up and down movements in 
economic activities. 
?
Economic activities measured in terms of 
production, employment and income move in a 
cyclical manner over a period of time. 
?
Cyclical movement is characterized by 
alternative waves of expansion and contraction. 
?
Associated with alternate periods of prosperity 
and depression. 
Characteristics of Business Cycles
?
Periodicity 
?
Wavelike movements in income and employment occur at 
intervals of 6 to 12 years. 
?
Gap between two cycles is not regular or predictable with 
certainty. 
?
Synchronism
?
Impact is all embracing, i.e. large sections of the economy 
experience the same phase. 
?
Happens because of interdependence of various sectors of the 
economy. 
?
Self Reinforcing
?
Due to interdependence in the economy, cyclical movements 
faced by one sector spread to other sectors in the economy; and 
from one economy to other economies. 
?
Thus the upward swing of the cycle is reinforced for further 
upward movement and vice versa.
Time Unit 
(years)
GNP 
(%)
Phases of Business Cycle
Four phases: 
?
Expansion, B to C 
and From F
?
Peak, (Boom) C to D
?
Contraction  D to E 
(recession), 
?
Trough (Slump/ 
depression) A to B and 
E to F
•
Time gap between two bouts of trough (from B to E) or peaks (from 
D to G) can vary between 6 to 12 years. 
•
For 3 to 5 years, the economy experiences growth, then for another 
3 to 5 years, it faces contraction or recession.
•
GG’ is the steady growth line, to show that the general trend is that 
of growth. 
Expansion
Contraction
Trough
A B
C D
E
F
Peak
Expansion
Contraction
Slump
G
G’
Page 5


Business Cycles
Business Cycle
?
Shows the periodic up and down movements in 
economic activities. 
?
Economic activities measured in terms of 
production, employment and income move in a 
cyclical manner over a period of time. 
?
Cyclical movement is characterized by 
alternative waves of expansion and contraction. 
?
Associated with alternate periods of prosperity 
and depression. 
Characteristics of Business Cycles
?
Periodicity 
?
Wavelike movements in income and employment occur at 
intervals of 6 to 12 years. 
?
Gap between two cycles is not regular or predictable with 
certainty. 
?
Synchronism
?
Impact is all embracing, i.e. large sections of the economy 
experience the same phase. 
?
Happens because of interdependence of various sectors of the 
economy. 
?
Self Reinforcing
?
Due to interdependence in the economy, cyclical movements 
faced by one sector spread to other sectors in the economy; and 
from one economy to other economies. 
?
Thus the upward swing of the cycle is reinforced for further 
upward movement and vice versa.
Time Unit 
(years)
GNP 
(%)
Phases of Business Cycle
Four phases: 
?
Expansion, B to C 
and From F
?
Peak, (Boom) C to D
?
Contraction  D to E 
(recession), 
?
Trough (Slump/ 
depression) A to B and 
E to F
•
Time gap between two bouts of trough (from B to E) or peaks (from 
D to G) can vary between 6 to 12 years. 
•
For 3 to 5 years, the economy experiences growth, then for another 
3 to 5 years, it faces contraction or recession.
•
GG’ is the steady growth line, to show that the general trend is that 
of growth. 
Expansion
Contraction
Trough
A B
C D
E
F
Peak
Expansion
Contraction
Slump
G
G’
Phases of Business Cycle
?
Expansion: when all macro economic variables like 
output, employment, income and consumption 
increase. 
?
Prices move up, money supply increases, self reinforcing 
feature of business cycle pushes the economy upward.
?
Peak: the highest point of growth; referred to as  boom. 
?
Stage beyond which no further expansion is possible, 
?
Sees the downward turning point.
?
Contraction/Recession: means the slowing down 
process of all economic activities. 
?
Trough or Slump: the lowest ebb of economic cycle. 
?
Followed by the next turning point in the cycle, when new 
growth process starts afresh. 
Contd.
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FAQs on PPT - Business Cycles/Cyclical Movement, - Business Mathematics and Statistics - B Com

1. What is a business cycle?
Ans. A business cycle refers to the fluctuation in economic activity over a period of time. It consists of four phases: expansion, peak, contraction, and trough. During expansion, the economy grows, reaches a peak where it is at its highest point, and then starts to contract until it reaches a trough. The cycle then repeats itself.
2. How long do business cycles typically last?
Ans. The duration of business cycles can vary, but on average, a complete cycle lasts around 5 to 7 years. However, there is no fixed duration, and cycles can be shorter or longer depending on various factors such as economic conditions and government policies.
3. What causes business cycles?
Ans. Business cycles are caused by a combination of various factors. Some of the main factors include changes in consumer spending, investment levels, government policies, technological advancements, and global economic conditions. These factors can influence the level of economic activity and lead to fluctuations in the business cycle.
4. How do business cycles affect employment?
Ans. Business cycles have a significant impact on employment. During the expansion phase, businesses tend to hire more workers as demand for goods and services increases. However, during the contraction phase, businesses may lay off workers as demand decreases. This can result in higher unemployment rates and job losses until the economy enters the next expansion phase.
5. Can business cycles be predicted or controlled?
Ans. While it is challenging to accurately predict the timing and duration of business cycles, economists use various indicators and data to make informed forecasts. However, the ability to control business cycles is limited. Governments can implement certain policies such as fiscal and monetary measures to mitigate the impact of economic fluctuations but cannot entirely control or eliminate business cycles.
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