Phases of Business Cycle

A trade cycle passes through the following four phases :

1. Recession:
Recession is characterized by the following:

• High level of general unemployment.
• Maximum fall in the consumers demand.
• Surplus production capacity (unused production capacity).
• Fall in the business profits.
• Fall in in the expectation about the future profits.

2. Recovery:
Following are the symptoms of Recovery:

• Gradual renewl of investments.
• Trend of increase in employment.
• Gradual increase in the consumption of the consumers.
• Increasing trend in the business profits.
• Creation of confidence in the business.
• Either price stability or slow increase.

3.Boom:
Boom is characterized by the following:

• Acceleration in the consumer spending.
• Maximum use of production capacity which creates shortage of labour.
• Production can be increased by labour saving methods of production only.
• Too much increase in the investment expenditure.
• Price increase due to increase in demand.
• Business profits on the highest peek.

4.Recession:
Symptoms of Recessions can be referred as under:

• Fall in the consumption starts.
• Suddenly the existing investments are felt non-profitable stopping the new investment.
• Fall in production.
• Decrease in the level of employment.
• Some business are ruined due to fall in the profits.
• Ar last recession is converted into the severe depression and so a business cycle completes its journey.