Question

Describe the phases and key characteristics of business cycles. Then explain where we are in the business cycle right now and why

Answer 1

The four phasesnof business cycle are -

1. Expansion - Expansion occurs in the phase of business cycle when there is an increase in economic growth, employment and upward pressure on prices

2. Peak -   As the word speaks, peak is the highest level of pgase in business cycle. It occurs when maximum output is produced by the economy, employment rate is full and inflationary pressure on prices are evident.

3. contraction - This is the phase of business cycle where econmic growth slows down, employment falls and inflation pressure subside.

4. Trough - Trough occurs when economic growth hits the bottom line and now from here the next phases of business that is expansion and contraction will emerge.

Key characteristics of Business cycle -

• occur periodically -   These four phases of business cycle occur periodically. It varies from time to time depending upon industries and economic conditions
• synchronic-  Another characteristics of Business cycle is that it is synchornic. These are not limited to any one firm or industry. They are pervasive in nature.
• All sectors get affected- The adverse affects of business cycle is faced my almost all the sectors. These include capital goods indudtry, consumer goods industry etc
• All departments are affected -  business cycle not only affect the output of goods and services but it also affect other departments like employment, interest, price etc

The economy of united states have been in the expansion phase of business cycle.

It has been in this phase since last ten years counting from 2008 where trough was occurred. After that it entered into the phase of expansion. As we know that expansion phase usually remains for 5 years or so, so many people are have indicating that they are going to face the problem of recession very soon.

US is facing expansion phase of business cycle right now as there GDP and economic growth both are increasing. Their unemployment rate has also been decreased. The interest rate has been increased as fed charges aim is to maximise the employment rate and stabilise the prices