PPT - Business Cycles/Cyclical Movement, - Business Mathematics and Statistics - B Com

 Page 1


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.