Learning About the Business Cycle
A business cycle is the blueprint of inveterate changes in the economic conditions, from good times to bad times, and back to good. In each cycle there are usually four stages which are prosperity, decline or crisis, depression or recession, and recovery. The process then repeats itself but the timeframe is indeterminate. Depending on the economic status and how industries react to the effects of the business cycle, some business cycles take only a year or so while others end only after a number of years.
In the prosperity stage, the business cycle is marked by rapid, profitable trade. Prices and wages usually rise, jobs are plentiful, and businessmen expand their activities. In the decline stage, trade drops and a surplus of product results. Workers are laid off and prices generally drop down. Pessimism causes truncated business activity, thus adding to the crisis. The end result is a depression, when the condition is severe, or a recession, when it is minor.
Bases of business cycles are multifaceted and economic experts have presented many theories about it. Some believe that a decline should be allowed to run its course. These economic experts point out that after a decline reaches rock bottom, surpluses diminish and productions automatically amplify. Confidence returns, prices start rising, and recovery begins. However, other economists believe that the government and industry sectors should take particular approach to offset the decline stage and prevent severe depressions. One of the major crisis in the business cycle occurred between the year 1929 to 1939 and this has been known in history as the Great Depression.