What Is The Revival Or Recovery Period In Trade Cycle?

The economic conditions which we have described in depression phase do not remain as such for ever. After sometimes revival or recovery sets in under the influence of a variety of factors. The revival phase develops when the accumulated stock of commodities with the businessmen are exhausted. The costs under the impact of prolonged depression begin to fall.

The prices which have reached at its lowest level stop falling further. There is then complete harmony between costs and price relationship. When profits begin to reappear, the businessmen are induced to invest their hoarded money in some enterprises. In order to steal a march over other industrialists, they start repairs, renewal and replacement of their capital equipments and stocks. The capital goods industries resume activities. There is gradual re-employment of labor.

The money incomes begin to increase and the effective demand is revived. The government also tries to break the spell of depression by starting construction or expanding some public works with a view to give more employment. The commercial banks which have accumulated large reserve offer credit on favorable terms. The marginal efficiency of capital begins to rise and investment opportunities brighten up. The consumers start buying commodities to avoid rise. Due to increase in demand for commodities, investment in various industries is stimulated and thus the revival takes place.