Monday, August 24, 2009

Trade Cycle and its Characteristics

There are upward swings and then down ward swings in the business. The periods of business prosperity alternate with periods of adversity. Every boom is followed by a slump and vice versa. This is a trade cycle. The trade cycle simple means the whole course of trade or business activity which passes through all phases of prosperity and adversity. In other words, the business fluctuations are termed as trade cycle or business cycle. According to W.C.Mitchel trade cycles are fluctuations in the aggregate economic activity. Any trade cycle starts from depression, enters into rival, then converts itself into boom and finally turns into recession. Such fluctuations are the common features of the capitalistic economies.

Characteristics of a Trade Cycle:

A study of trade cycle has revealed two important characteristics.

1. It’s cyclical nature i.e. periodicity.

2. It’s general nature or synchronism.

In the first place it has been found that trade cycle occur periodically at fairly regular intervals. The interval is not precise one but the degree of regularity is sufficient to demonstrate the periodicity of a trade cycle. There is general consensus of opinion that the cycle takes seven to ten years nearly to complete itself.

The second characteristics is synchronism or its all embracing character. The business world is one economic unit like a living organism. An Attack on one part of business organism is bound to send a shock to other parts. If one firm is in grief those who deal with it cannot remain unaffected and they in turn will affect others with whom they may be in commercial intercourse. Thus depression passes from one industry to another. A time comes when all industries in all distends and firms in the country are engulfed. Few can escape the deluge.


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