Features OF Business Cycle is very effective for capitalist economy. It would be very helpful for those who are researching the system of business cycle in an ongoing economy crises. Following are some proven features.
Features Of Business Cycle
Cover the Whole Economy
Ups and downs of trade cycle are regular and cover all the sectors of the economy. Temporary and partial fluctuations are not considered as trade cycle.
Time Period is not Fixed
A trade cycle may complete its phases in a period of 5 to 10 years. Sometime this period may extend to more than 10 years or decrease to less than 5 years.
International in Nature
Countries of the world are closely connected with each other through international trade. Prosperity or depression in one part of the world will be transferred to other parts. There fore if there is depression in a big economy, it may cause depression in many countries of the world.
Recovery is Slow But Recession is abrupt and speedy.
The trough of depression contains the germs of recovery and the boom of expansion contains the germs of recession. But it has been observed the usually recovery is slow but speed of recession is fast.
A feature of Capitalistic Economy
No doubt the whole world is affected by economic fluctuations but originally the fluctuation start from capitalistic economies. This is because all economic activities are controlled by working together of demand and supply. When due to any ‘reason these forces do not function freely then economic disturbance starts. Further Industrial sector is more sensitive to trade cycle than agriculture sector.
Features of Business Cycle Is Bound To Make An Impact In Your Business.
Difference in Intensity
During the phases of depression and prosperity, all sectors of the economies are affected but the effect is not same. For example, capital goods producing industries suffer more.
Pervading in Nature
When an important sector of the economy suffers from depression, it definitely affects other sectors of the economy. The action and reaction of economic events takes place in such a way that whole of the economy is suffered. Similarly a sign of expansion some important sector of economy becomes a hope for the revival of the whole economy.
Complex in Nature
Important feature of trade cycles is that they represent a very complex phenomenon, which is caused by many factors. This is why all trade cycles do not have uniform characteristic and causes. Due to this reason it is difficult to make accurate prediction of trade cycles before their occurrence.
Setting Within Long Run Growth Trend
As a market economy grows over a long period of time, the peak level of every next trade cycle occurs at a higher level of national income than the previous trade cycle.
Economic and Social Effects.
The effects of trade cycles are not limited to economic activities only rather they have serious social consequences as well. It affects behavior of people, and crime rate etc.
The main characteristics of economic cycles are:
They occur periodically: This means that prosperity and depression will occur alternately. But there need not be uniformity in scope and magnitude.
All-encompassing: The business cycle implies that the boom or bust effect of the phase will affect all industries throughout the economy and will also affect the economies of other countries.
It is similar to a wave: The business cycle has established a pattern of movements that is analogous to waves. Rising prices, production, employment and prosperity will become the characteristics of the upward movement. Falling prices and unemployment will become the characteristics of the downward movement.
The business cycle process is cumulative and self-reinforcing: The upward movement and the downward movement are cumulative in their process. Once the upward movement begins, it creates further movement in the same direction by feeding on itself.
Components of the business cycle
Business cycles have certain very determining components, as we have seen. But these also depend greatly on factors such as the periodicity or period in which they occur . That is, the time in which they take place, since this can determine, in turn, the duration, which is another factor. The duration of a business cycle can be key to knowing what it may mean in the near future , or what path the economy in general will take.
Another aspect to take into account is the amplitude, that is, the area affected by this economic cycle. And knowing who are those who assimilate these changes in the cycle, determining who can be benefited or affected depending on the case and the type of cycle to which it refers. Another aspect, and very important, is the recurrence with which an economic cycle occurs. Since, if it is found in the cycles of crisis or recession, they can be very negative indicators. And, on the other hand, the way in which they occur , that is, what drives them and how.
Conclusion
Understanding the features of the business cycle is essential for individuals, businesses, and policymakers. By recognizing the recurring pattern and the distinct phases of expansion, peak, contraction, and trough, stakeholders can better navigate the ups and downs of the economy. From employment and income fluctuations to the impact on investment and financial markets, the business cycle shapes various aspects of our economic landscape. By staying informed about the key features of the business cycle, individuals and businesses can make more informed decisions and adapt to the ever-changing economic environment.