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eco - business cycle

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Information about eco - business cycle
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Published on August 21, 2011

Author: tasy

Source: authorstream.com

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BUSSINESS CYCLE: BUSSINESS CYCLE INTRODUCTION…: INTRODUCTION… The term business cycle (or economic cycle ) refers to economy-wide fluctuations in production or economic activity over several months or years. These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth. DEFINITION…: DEFINITION… According to Keynes, “Trade Cycle is composed of periods of good trade characterized by rising price and low unemployment percentage altering with periods of bad trade characterized by falling price and high unemployment percentage” FEATURES…: FEATURES… A Buss. Cycle exhibits a wave like movement. The gap between Prosperity & Depression. Downward movement is quicker & upward movement is slower. Buss. Cycles are International in character. Profits fluctuate more than other incomes PHASES ….: PHASES …. Prosperity Recession Depression Recovery PROSPERITY…: PROSPERITY… Ideal for Business. Demand grows & Economy expands. New products introduced & Markets are created. Rapid rise in incomes of people & people increase their consumption. Indian economy experienced prosperity in July 2004 RECESSION…: RECESSION… It is contraction phase of Buss. Cycle. Decline in country’s GDP. Decline in Prices, Demand, Investment, Employment. The Indian economy experienced two short recession in 1991 and 1996. RECOVERY…: RECOVERY… Rise in : Demand for Consumption goods Investments Employment Income Production DEPRESSION…: DEPRESSION… GDP of a country drops by at least 10% It is a result of Recession for a long period. Decline in Production, Employment, general Price level, Profits of producers & traders. Indian economy experienced depression in September 2001 CAUSES…: CAUSES… INTERNAL FACTORS :- Consumption : When consumers spending increases, business will increases production- causing them to hire more workers and purchase more materials and capital goods. Business Investment : The purchasing of capital goods increases the number of jobs in the economy. Government Activities : The government can influence the business cycle through Fiscal policy and Monetary policy. Slide 11: External factors :- Inventions and innovation : Major changes in technology can influence the business cycle. Usually technological changes move the economy in a positive direction, but this is not always so. Wars and political events : The impact of such events on the economy are very fact specific- in other words, difficult to generalize about. REMEDIAL MEASURES…: REMEDIAL MEASURES… MONETARY POLICY FISCAL POLICY DISCRETIONARY FISCAL POLICY NON DISCRETIONARY FISCAL POLICY MONETARY POLICY…: MONETARY POLICY… Monetary policy as a method to control business fluctuations. To control the expansion of money supply during a boom , it raises its bank rate ,sells securities in the open market , raises the reserves ratio. To control a recession or depression , the central bank increases the reserves of commercial banks. It reduces the bank and interest rate. FISCAL POLICY…: FISCAL POLICY… DISCRETIONARY FISCAL POLICY – It refers to a deliberate and purposeful change in the government expenditure and taxes. N ON DISCRETIONARY FISCAL POLICY – Refers to a built in tax and expenditure mechanism that increases or decreases the aggregate demand. ADVANTAGES …: ADVANTAGES … FLEXIBILITY LONG TERM PLANNING ATTENTION TO CUSTOMERS OBJECTIVITY DETAIL STUDY CONCLUSION…: CONCLUSION… Business cycles are not regular and are not all alike. Cycles have different lengths and turning points are hard to predict. All variables do not behave exactly the same over each cycle. However, there are regularities we want our models to capture.

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