Explain The Concept Of Business Cycle?


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Tariq Habib answered
Sometimes business conditions are healthy, with plenty of job vacancies, factor working overtime and sometime business conditions are weak, and these fluctuations are known as business cycle. Economic history shows that the economy never grows in smooth and even patterns. A country may enjoy several years of exhilarating economic expansion and prosperity, as the United States did in the 1990s. This might be followed by a recession or even a financial crisis, on rare occasions, a prolonged depression. The national output falls; profits and real incomes decline, and the unemployment rate jump to uncomfortably high levels as legions of workers lose their jobs.

Eventually the bottom is reached, and recovery begins. The recovery may be slow or fast. It may be incomplete, or it may be so string as to lead to a new boom. Prosperity may mean a long, sustained period of brisk demand, plentiful jobs, and rising living standards. Or a quick, inflationary flaring up of prices and speculation, to be followed by another slump, may mark it.Upward and downward movements in output, inflation, interest rates, and employment form the business cycle that characterized all market economies.

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