Business cycle in economics
In economics, business cycle is defined as the recurring levels of economic activity experienced by an economy in a given country over a long period of time. There are five parts or stages of business cycle, which include expansion, peak, recession, trough and recovery. Economic growth is not a steady phenomenon and exhibits patterns of expansion, peak and contraction. The five phases of economic growth cannot be identified easily as a result of certain challenges. It becomes so challenging to identify the five phases of economic growth due to certain reasons.
First, business cycles reflect the recurring rise and fall of economic activities, which is not easy to identify. Economic activities in this aspect relates to production, wages, prices, profits, employment and any other macroeconomic activity. The cycles are recurring, nonperiodic and one cycle should be more than one year making it difficult to measure a season of expansion or contraction.
Business cycles reflect the inability of market place to accommodate shifting markets for new and substitute products, advanced technologies and changing needs of occupational skills (Knoop Todd A., 2004). Technology and occupational skills are major challenges in determination of economic growth because of their rapid change. Business cycles are irregular, vary
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Business cycle is measured in form of a country’s Gross Domestic Product(GDP) which notable is faced with certain economic changes such as depression and recent economic melt down. It is a changeling because the occurrence of such economic implications is unpredictable. Economic growth is measured by certain indicators reflected by business cycle and this makes it hard for a country to notice its stage of economic development.
Knoop Todd A., 2004, Recessions and Depressions: Understanding Business Cycles, Praeger.