Hawtrey Trade Cycle:

Hawtrey trade cycle is an economic theory that was developed by Ralph George Hawtrey, a British economist. It is a theory that explains the fluctuation of economic activities in a country over time. According to Hawtrey, trade cycles occur due to changes in the level of investment in the economy. The theory is based on two main assumptions:

1. The economy is a closed system
2. The level of investment is the primary determinant of the level of output in the economy.

Four Phases of the Hawtrey Trade Cycle:

The Hawtrey trade cycle consists of four phases:

1. Boom phase - During this phase, the level of investment in the economy increases, leading to an increase in output and employment. The economy experiences growth, and there is a positive sentiment among consumers and investors. The boom phase is characterized by a high level of confidence, rising prices, and an increase in credit.

2. Recession phase - The recession phase occurs when the level of investment in the economy starts to decline. There is a decrease in output and employment, and the economy starts to slow down. Consumers and investors become less confident, and there is a decrease in credit.

3. Depression phase - The depression phase is the most severe phase of the trade cycle. During this phase, the level of investment in the economy is at its lowest point. There is a significant decrease in output and employment, and the economy is in a state of recession. Consumers and investors are pessimistic, and credit is scarce.

4. Recovery phase - The recovery phase occurs when the level of investment in the economy starts to increase again. There is an increase in output and employment, and the economy begins to grow. Consumers and investors become more confident, and credit becomes more readily available.

Factors Affecting the Hawtrey Trade Cycle:

Several factors can affect the Hawtrey trade cycle, including:

1. Monetary policy - Changes in interest rates and the money supply can affect the level of investment in the economy.

2. Fiscal policy - Changes in government spending and taxation can also influence the level of investment in the economy.

3. Business confidence - The level of confidence among businesses can affect the level of investment in the economy.

4. International trade - Changes in international trade can also impact the level of investment in the economy.

Conclusion:

In conclusion, the Hawtrey trade cycle is a theory that explains the fluctuation of economic activities in a country over time. It is based on the assumption that the level of investment is the primary determinant of the level of output in the economy. The trade cycle consists of four phases - boom, recession, depression, and recovery - and several factors can affect it, including monetary and fiscal policy, business confidence, and international trade.

Answer:-(A) The trade cycle is a purely monetary phenomenon because general demand is itself a monetory phenomenon. Hawtery was of openion that in every deep depression , minatory factors play a critical role of money the basis of his theory of the trade cycle.