The business cycle phases and turning points and explain the concepts of recurrence and persistence.
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Explanation of Solution
A business cycle could be used in understanding the upward and downward movements in relation to the output of goods and services within an economy. It is normally presented in terms of the rise and fall of the
A business cycle consists of several phases or stages. Expansion being the first, suggests a rise in factors such as income, employment, production as well as sales. At a time of expansion debt would be paid on time by people. The money supply within the economy would be steady with booming investments. At the second stage which is called as the peak, the economy reaches the maximum level that could be reached. At this point, the price levels would be at their maximum with many economic indicators stop growing further. Restructuring economic operations start to occur at this stage as growth starts reversing. Recession is the third phase of the cycle. It is considered as a time of contraction in the economy. During such a time, economic indicators start showing adverse results such as high
The concept of recurrence could be identified in a business cycle when there are contractions or expansions repeated. In other words, repeated contractions or expansions fall under the concept of recurrence as they occur over and over again. Persistence is another concept depicted by a business cycle. When economic activities face a situation of slowdown, if it continues to further decline, it would be a condition of persistence. On the other hand, persistence could happen at a time of expansion as well. If the growth trend of an economy keeps rising for a longer period of time, it would also be considered as a situation of persistence.
Introduction: A business cycle is a curve of upward and downward movements depicting the operations of business organizations as well as economies at large. It is also called as the economic cycle and trade cycle. Through a business cycle, the production trends as well as the long term growth trends could be identified.
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