What are the characteristics of a business cycle

Question

What are the characteristics of a business cycle?

Answer 1

Characteristics of a business cycle are as follows:

1. This is synchronic. The downward and upward movements tend to arise at all similar period in all industries. The waves of depression or prosperity generate a wave in another industry. While industry picks up to provide more service and more income and so forth to workers and this provides new orders for capital goods and raw materials. It helps other firms to prosper as well.

2. The cycle is a wave-as movement. The era of prosperity and depression can be alternately considered in a cycle.

3. Cyclical fluctuations are recurring within nature. The different phases are repeated is followed through depression and the depression again in followed through a boom.

4. In nature business cycles are cumulative and self –reinforcing. All movements feed on itself and keep up the movement in similar direction. Once booms starts this goes on growing until forces accumulate to reverse the direction.

5. There can be no indefinite eternal or depression boom period. All phase include in itself the seed for other phase. So, the boom, when this reaches its peak, turns to recession.

6. Business cycles are pervasive within their effects. The cyclical fluctuations influence each and every part of the economy. Prosperity or depression felt in one part of the economy makes its impact in other part as well. The cyclical movements are still international in nature. The mechanism of international trade creates the boom or depression in one country shared though other countries also.

7. Presence of a crisis. The down and up movements are not symmetrical. There downward movements are not symmetrical. And there downward movement is more rapid and violent than the upward movement.