What Is Meant By Trade Cycles?

The world has registered a phenomenal economic progress during the last one hundred years. If we examine the statistical record of business conditions of this period we will find that the course of business, like that of true love, has never run smooth. The business activities exhibit more or less wave like fluctuations.

There is sometimes a period of good trade and sometimes bad. The statistics indicate that the period of prosperity is generally followed by a period of panic or adversity. In economics, this tendency of the business activity to fluctuate from prosperity to crash and then back to prosperity and panic again is called business cycle or trade cycle.

A trade cycle is composed of periods of good trade a characterized by rising prices and low un-employment percentage. The average length of trade cycle is a little more over eight years.The course of a trade cycle is generally traced through its various phases. Each of the phases is characterized by different economic conditions. There are four distinct phases of business cycle namely contraction, revival, expansion and recession. Some economists call them depression, recovery, boom and recession. In each phase the business face the different situation and pas through different experience.