Question

Give the meaning of trade cycle and explain the various phases of a trade cycle.

Answer 1

Trade cycle:

• According to Heberler, Trade Cycle is an interval that embraces alternating periods of prosperity (good time) and depression (bad time).’
• According to Hawtrey, Trade cycles are continuous phases of good and bad changes occurring in the economy.’

Phases of a trade cycle:

• Boom, Recession, Depression and Recovery are the four phases of trade cycle.
• Trade cycles take place in all economies and all economic activities in the long run. However, in market oriented economies, these occur more openly while in state controlled economies the state suppress these cycles.

Characteristics of a trade cycle:

• They show dynamic changes in the economy.
• They show positive and negative changes taking place in the economy.
• These arise because of several factors.
• Trade cycles have various phases and they do not last for a uniform period.