Characteristics of Business Cycle or Trade Cycle

Fri, 07/27/2012 - 02:10 -- Umar Farooq

Characteristics of Business Cycle or Trade Cycle

Following are the important characteristics of business cycle.

Aggregate economic activity – Fluctuations in the aggregate economic activity represents business cycle. If there are downswing and upswing trends in a particular sector of the economy, they will not present trade cycle.

Pervasive in effects – Whenever an expansion or contraction takes place in any sector of the economy it represents to all other sectors of the economy like an epidemic e.g. if investment expands it results in an increase in national income, employment level etc.

Rhythmic changes – It means, if there is an expansion in any sector of the economy, it will affect all other sectors which will also move upward in a rhythmic manner. Hence, all the economic activities move together in one direction. Thus, there is no possibility to have an expansion in one sector of the economy and simultaneously a contraction in another sector of the economy.

No specific period – The difference phases of business cycle are not of the same duration e.g. a phase of expansion could be of eight years or more and phase of depression may be two years. Similarly duration of each trade cycle differs from the other.

Not similar inform, duration & amplitude

International in Character – The trade cycle do not confined to a single country and they spread to all countries of the world through international trade. In 1930 a great depression was noticed with affect many counties.