Characteristics Of Trade Cycle

The term trade cycle also referred to as economic cycle or business cycle. Trade cycles essential means a phenomenon of cyclic fluctuations of growth and fall in the market economy. These cyclic fluctuations takes place over a long period of time, consisting of several years and are associated with the long term trend of economic activity. Trade cycles occur in various phases, they begin with periods of rapid economic growth which are subsequently followed by periods of sluggishness or stagnation and then periods of slow growth. This process continues in a cyclic phase and one such cycle is called a trade cycle. The occurrence Trade cycles results in fluctuations affecting the aggregate employment, income output and price level of goods

In 1946 economists Arthur F. Burns and Wesley C. Mitchell provided the now standard definition of business cycles,“Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; in duration, business cycles vary from more than one year to ten or twelve years; they are not divisible into shorter cycles of similar characteristics with amplitudes approximating their own.”

Common charecteristics of trade cycles

The above definitions contain some common features and thus reveal some important characteristics of trade cycles.

1. Trade cycles essentially show movements in the economy, a wave-like movement is can be visualised showing an upward trend and a downward trend in the economy.

2. Trade cycles have various phases, periods of growth and rise followed by periods of stagnation.

3. Trade cycles occur in a time span, although that time span cannot be exactly defined, it can be interpreted that these trade cycles occur within a time period.

4. Trade cycles are an economy wide phenomenon, i.e. - growth or fall is not limited to one particular industry or sector but gradually spreads to other industries and sectors.

5. Trade cycles are an uncertain

The level of production increases and there is an increase in the produced output and due to this wave of positivism in the market the sales and prices increase subsequently leading to a rise in employment and profits, also in the standard of living. The demand for goods and services rises and this is matched by increasing production. Due to this deployment of resources the level of production is maximum and there is a rise in the gross national product, there are vast profits and investor’s reap elevated dividends. General employment increases and the peek is reached, this is also called the period of boom. In short the prosperity phase can be summed as a period where there is lots of business activity, lots is being produced and consumed. Wages and profits are high and Unemployment is very low and there is a general feeling that things are “good” and will remain to be good”. However this phase quickly shifts from a period of prosperity to a period of stagnation as the growth eventually stops and the entire process starts to shift downwards on the