What are the Characteristics of Business Cycle?

Characteristics of Business Cycle

The business cycle occurs periodically in a wave-like fashion with varying magnitude affecting not only the entire economy of the country but also making its impact on economies of other countries. Let us discuss its features / characteristics in detail.

Characteristics, Features of Business Cycle

Characteristics, Features of Business Cycle

1. Business cycle occurs Periodically

The Business cycles occur periodically in a regular fashion. This means the prosperity and depression will be occurring alternatively. But there need not be uniformity in the extent and magnitude. Though the general structure of different cycles may be the same, it may not be perfectly rhythmical in character.

2. It is all embracing.

The business cycle implies that the prosperity or depressionary effect of the phase will be affecting all industries in the entire economy and also affect the economies of other countries. It is international in character. The is an example of this.

3. Business Cycle is wave-like

The business cycle will have set pattern of movements which is analogous to waves. Rising prices, production, employment, and prosperity will become the features of upward movement. Falling prices, unemployment will become the features of the downward movement.

4. Process of Business Cycle is cumulative and self-reinforcing

The upward movement and downward movement are cumulative in their process. When once the upward movement starts, it creates further movement in the same direction by feeding on itself. This movement will persist till the forces accumulate to alter the direction and create the downward movement. When a downward movement starts, it persists in the same direction leading to the worst depression and stagnation till it is retrieved to gain an upward movement.

5. The cycles will be similar but not identical

Different cycles and waves in the business cycles will be similar in general features, but they are not identical in all respects.

Besides these features, the American Economic Association stressed the following important characteristics of the business cycle.

1. Generally, prices and production fall or rise together. The exception is agriculture in which, during the downward phase of the cycle, prices will be falling but production will be increasing. The reason is, with falling prices of agricultural commodities, the farmers would try to produce more to offset the loss of falling prices of their produce and maintain the same level of income.

2. Fluctuations in output and employment will be greater in capital goods industries than in consumption goods Industries.

3. Phenomenal changes in employment, output and price level will be normally accompanied by changes in currency, credit and velocity of circulation of money in the same direction.

4. Prices of agricultural goods will be flexible while the prices of

5. Prices of agricultural goods will be flexible while the prices of manufactured goods will be comparatively rigid as they will be kept stable by the manufacturers.

6. Profits fluctuate by a larger percentage than the other types of

7. Profits fluctuate by a larger percentage than the other types of income.

8. Fluctuations will spread throughout, as industries are interconnected and the cyclical fluctuations tend to be international in the sense that the prosperity or adversity will affect the foreign countries, through international trade.

Leave a Reply

Recent Posts

Related pages

characteristics of capital budgetingclean bill discountingprobabilistic sampling techniquessampling methods advantages and disadvantageswhat is meant by sebisevices definitioninflation in managerial economicsautocratic leadership style advantages and disadvantagescluster sampling sampledifferent types of npadeficit financing in indiadebenture loans1us dollar in rupeesformal and informal group definitionlimitations of quota samplingconcept of activity based costingdisadvantages of selling goods on creditdays sales outstanding dsonon budgetary control techniquesdays cogs in inventorytypes of capexprobability and nonprobability sampling methodsunderwriter meaningdefinition of sebiwhat is meaning of cifsole trading concern definitionbill of lading shippingdefine dumping economicsadvantages of numeric keypaddisadvantages of buying a franchisepayables turnover formulaallotment of shares proceduredeductive or inductiveagm and egm meaningexceptions to privity of contractlifting veil of incorporationfunctions of crisilmost effective sales promotionsdisadvantages of newspaperssole trading businessleadership tqmfranchisor advantagesexpenses ratio interpretationwhat is the role of sebidifference between redeemable and irredeemable debenturesmeaning of controllableadvantages of flow productionvalues and uses of precisexamples of trade organizationsdisadvantages of hire purchaseprocedure for allotment of shares in private companymerits and demerits of online marketingadvantages of periodic inventory systemmixed economy in nigeriatarget costing vs traditional costingdecentralized procurement definitionmarginal absorption costingteeming and lading in auditingrediff shoppingslimitations of personal sellingformula for calculating payback periodbenefits of probability samplingreceivable turnover calculatordefinition of costing systememployee turnover is always bad for an organizationchit fund rules and regulations in indiafactory overhead definitiondefinition of drawee and drawerdisadvantages of systematic random samplingproblems on payback period with solutioncore product augmented productmeaning of warehousingexample of a cluster samplefixed charge and floating chargedelivery cif meansformula for calculating payback period