Trade cycle In simple words trade cycle can be defined as alternative period of prosperity and depression in economy. In other words, the frequent occurrence of prosperity after depression and depression after prosperity like ebb and flow in capilastic economy is called trade cycle. In broader sense, it can be defined as an alternative expansion and contraction in over all business cycle. As a result of this, it presents the different scenarios of economic activity such as the gross products, industrial production employment and income. This cyclical fluctuations is observed in every branches of national economy at a time. However in some save cases, it is limited to individual industry or individual sector of the economy. Features of trade cycle/characteristic of business cycle Trade cycle has got a unique cyclical nature they are listed below. 1: business cycle is a wave like movement. 2: business cycle is synchronize ; business cycle has a synchronize nature once an economy faces trade cycle than it easily transmitted to another economy and country. And finally its effects are observed worldwid. 3: pattern trade cycle is irregular: Thought the characterstic of business cycles are similar, they have the different degree of effect in economy. Such as great depression - 1930s, and swallow and narrow in recession of 1998. 4: business cycle are not periodic: there is no certain period of trade cycles. Its occurrence may be occurred in 4 or 10 or 40 years gap. And it is also not necessarily the same duration for upwards and down ward wings, 5: trade cycle are cumulative: In capilastic economy business sector become more optimistic during boom and much pessimistic during recession. Therefore cumulative effect is seen in trade cycle. 6:peak and trough are not same: The movement from upturn to downturn is more sudden and violent them the changes from downward to upwards. Further the downward movement is more shav and speer and upwards movement is less steeper and slower. 7: it mostly occurs in capital good industry rather than consumer good industry: 8: Trade cycle contains self governing forces for boom and depression. Phases or effects of trade cycle A topical trade cycle is possessed by 4-6 phases or stages. They are depression recovery (revival), prosperity (full employment), boom (over full employment), trough and recession. There is not unanimous acceptance for the first phase of trade cycle. However we start from depression in general. Depression Depression is the first stage of trade cycle in which business activity in a nation is for below the normal level. The phase of depression is characterized may a sharp reduction of production, unemployment, falling price, falling profit, low wage, construction of credit, a rate of business failure and an atmosphere of all-round despair and pessimism. Thus, in this phase a decline in output is accompanied by a reductions in the volume of employment. In short: 1: macroeconomic variable or indicators are falling rapidly. A) reductions in the volume of output and business B) reductions is price. C) rise in unemployment. C) reduces effective demand E) MEC falls down. F) fall in bank deposit and reductions in credit expansion G) manufacturers suffer huge losses H) many firms are shut down I) much effect is seen manufacture goods than consumer goods. Trough Trough is the stage of stagnation where there is no wave of economic active at all. in other words continuation of depression up to bottom is the trough and it may last for short period. This is the most critical phase of economy. To escape from this, a tangular policies and program from entrepreneurial, monetary authority and government is to be formulated and set in to bring the end of this phase and pare ta way foe recovery.
Posted on: Wed, 03 Jul 2013 16:29:38 +0000
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