Phases of businesscycle

Peak
Recession
Depression
Trough
Recovery
Boom
Phases of Business
Cycle

Scheme of Presentation
 Introduction
 Different Phases of Business Cycle
o Expansion
• Recovery
• Boom
• Peak
o Contraction
• Recession
• Depression
• Trough
 Factors That Shape Business Cycle

Introduction
Definition:- The business cycle is the periodic
but irregular up-and-down movement in
economic activity, measured by fluctuations in
real gross domestic product (GDP) and other
macroeconomic variables.
 How do we measure “up-and-down
movement in business activity ?”
Percent change in real GDP

Different Phases of Business
Cycle
 Expansion :-increased consumer
confidence, which translates into higher
levels of business activity.
It consists of three small stages :
1.Recovery
2.Boom
3.Peak

1.Recovery
 The turning point from depression to
expansion is termed as Recovery or
Revival Phase.
 Consumer’s confidence starts to
increase.
 Rise in economic activities.

2.Boom
 Consumer’s confidence starts to increase at a
faster pace.
 Unemployment levels fall.
 Business starts increase their construction
levels.
 Rise in National Income.
 Rapid increase in economy.
 Inflation increase at very high rates.

3.Peak
 The economy has reached its peak.
 Output starts to standstill and level off.
 Consumer’s confidence starts to decline.
 People start to stop their buying.
 GDP begins to decline(bust).

• Contraction
 It is a period of decrease in consumer
confidence and economic activity.
 It consists of three smaller stages:
• Recession
• Depression
• Trough

1.Recession
 is a period of reduced economic
activity in which levels of buying,
selling, production, and employment
typically diminish.
 Consumer’s confidence starts to
decrease a little.
 Unemployment is increasing while
inflation is dropping.

2.Depression
 Depression is the most fearful
stage of a trade cycle.
 The phase of depression (also
called slump) is characterized by
low economic activities.
 Rapid decline in general output
and employment.

3.Trough
 Contraction reaches a minimum, or
 Economy hits bottom.
 Output starts to standstill and level off.
 Consumer’s confidence starts to level
off.
 End of recession, growth resumes.

Factors that shape business
cycle
 Volatility of investment spending
 Momentum
 Technological Innovations

Phases of businesscycle

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