BUSINESS CYCLE

By Group No. - 7

Business Cycle –

Business Cycle Is The Fluctuations In Business Activities Like Production, Pricing, Demand, Employment, Income Of People, Profit Etc.

It Is A Continues Process

Definitions –“Up & Down In The Business Activities Called

Business cycle.”

“Functions In The Business Activity Are Termed As Business Cycle”.

“Alternations In The Period Of Prosperity & Depression Is Called Business Cycle. ”

There Are Four Phases Generally In Business Cycle

Prosperity

Recession

Depression

Recovery

Business Cycle Is Good As Well As Bad For Org.

2. Recession

3. Depression

4. Recovery

1. Prosperity

G

ood

Tim

e Bad Time

Diagram Of Business Cycle

Prosperity –This Phase Is Characterised By Good Trade In Which Production Activities Are In The Full Swim/Swing.

Producers Offers Good Amount Of Jobs.

It Leads To Increase Income Level Of People Which Result In The Increase Demand From Theme & Hence Profit Of Entrepreneur's Gets Increase So This Phase Is Called As Phase Of Good Trade.

If The Business Activities, Production, Employment, Income, Demand, Profit,Remains Continue For A Longer Period Of Time, It Will Lead To The Point Of ‘Peak’.

Recession –Recession Is The Phase In Which Business Activities Slow Down.Where Exploitation Of All Resources, Producers Don’t Have Any Scope To Expand Their Production, Employment Opportunities Decreases, Leads ToDecrease In The Income Level Of People, Demand, Profit.

If This Phase Continuous For Longer Period Of Time, It Will Lead Economy Towards The Phase Of Depression.

Depression –

Depression Is The Phase Of Eco, In Which Businessman Loss Their Hopes.

Due To The Drained Funds Banks Cannot Lend Credits To Producers Hence Producers Can Not Start Production & It Leads To Unemployment, PeopleDon’t Have Jobs, Income, Demand, & Hence No Profit.

Recovery – After The Phase Of Depression Govt. Start Taking Control Of Economic Activities.Central Bank Release More Money Into The Economy, Commercial BanksLends Their Ideal Funds At The Lower Interest Rate To Produces, Again StartTheir Production Slowly, People Start Getting Jobs & Demand Increases In TheEconomy & Economy Gets Recover From Depression.

Successful Recovery Leads Economy Towards The Phase Of Prosperity Again& Business Cycle Gets Complete.

MONITORY THEORY By – R. J. Hawtrey

Criticism -

Hawtrey doesn’t consider non-moneroty factors like , demand, competition, govt.Rules & Regulation etc. For Business Cycle That’s Why His Theory Tends To BeIncomplete.

It Is Not Correct To Say Banks Are Responsible For Expansion & Contraction OfBusiness Activities.

Hawtrey Has Over Emphasized The Role Of Bank System In Economy.

According To The Hawtrey If Banks Increase Interest Rate Producer Will Not Demand Credit And Decrease The Production. Where As If Business Man FeelThat Feature Prospects Are There Even At The High Interest Rate They Will Demand Credit & Continue The Product Activities.

NON – MONITORY THEORY By J. Schumpetor

Criticism – This Theory Is Based On The Wrong Assumption Of Full Employ Because In Reality Full Employment Of Factors Of Production Isn’t Possible Hence It Tends To BeNon-Realistic Theory.

Like Hawtrey, Schumpetor Too Ignores Non-Monitory Factors For Business Cycle.

Schumpetor Has More Emphasize The Role Of Innovation In The Economic Activities Where As Critics Opine That Business Cycle Will Not Operate Only Because Of Innovation.