Title Unit 4 Macroeconomics ✅

UNIT – IV BUSINESS CYCLE THEORIES
Trade cycle is also called business cycle and it is the main characteristics of capitalist economy. In a free and capitalist economy, national income, employment level, price level along with their determinant factors keeps on changing from time to time. Therefore, various economic up and down are the normal situation of the free economy, i.e. like waves and tides in the sea. The situation of prosperity and depression keeps on occurring in the free and capitalist economy. In this situation of prosperity in the economy, the economic development will be in the positive direction and vice versa. It means that during prosperity, income, output, employment and price level, all macro economic variables are very high in the economy. It means that during depression, income, output, employment and price level, all macro economic variables are very low in the economy. Such ups and downs in the economic activities are called trade cycle ♥ Meaning of Trade Cycle

i. Cyclical Nature: - The nature of trade cycle is generally cyclical, i.e. the up and down fluctuation will be of recurring and repetitive. Consequently, the depression occurs after the state of prosperity and prosperity after the state of depression continuously and cyclically. ii. Regularity: - According to some economists, there is regularity in the fluctuation of trade cycle or the state of prosperity and the state of depression occurs in a fixed period. iii. Wave like movement: - The movement of trade cycle is just like the sea waves. In capitalist economy, depression after prosperity and prosperity after depression occurs in wave like movement. iv. International: - In modern economy, the nature of trade cycle becomes international. So trade cycle starts at one section of the economy and expands throughout the country and it expands from one country to another country. ♥ Characteristics of Trade Cycle