Business Cycle

Business cycles, also called trade cycles or economic cycles, refer to perpetual features of the economic environment of a country. In simple words, business cycles can be defined as fluctuations in the economic activities of a country. The economic activities of a country include total output, income level, prices of products and services, employment, and rate of consumption. All these activities are interrelated; if one activity changes, rest of them would also show changes.

These changes in the economic activities together produce a bigger change in the overall economy of a nation. This overall change in an economy is termed as a business cycle. Business cycles are generally regular and periodical in nature.

Definition: Lord Keynes defines business cycle as “a business cycle is composed of periods of good trade characterized by rising prices and low unemployment percentage, alternating with periods of bad trade characterized by falling prices and high unemployment percentage.”