sion the supply of goods stops to dominate on demand, that's why an economic equilibrium appears between them. At the same time conditions to end the crisis are being naturally created. p> Speaking of through, let's get back to the Great Depression. For instance, stock prices fell from $ 89 to 15 $ billion. An unemployment rate was 25%. 100 000 failed. br/>
Recovery
The stage of recovery is the most pleasant phase of any cycle. p> The economic conditions which we have described in depression phase do not remain as such for ever. After sometime revival or recovery sets in under the influence of a variety of factors. The revival phase develops when the accumulated stock of commodities with the businessmen are exhausted. The cost under the impact prolonged depression begins to fall. The price which have reached its lowest level stop falling further.
There is then complete harmony between costs and price relationship. When profits begin to reappear, the businessmen are induced to invest their hoarded money in some enterprise. In order to steal a march over other industrialists, they start repairs, renewal and replacements of their capital equipments and stocks. The capital goods industries resume activities. There is gradual reemployment of labor. p> The money incomes begin to increase and the effective demand is revived. The government also tries to break the spell of depression by starting construction or expanding some public works with a view to give more employment. The commercial banks which have accumulated large reserve offer credit on favorable terms. The marginal efficiency of capital begins to rise and investment opportunitiesbrighten up. The consumers start buying commodities to avoid the rise. Due to increase in demand for commodities, investment in various industries is stimulated and thus the revival takes place.
In the Great Depression recovery real GDP raised from $ 580 billion to $ 1300 billion. br/>
Peak
Recovery ends with a "boom" or peak of cycle when the economy is operating at maximum capacity, there is full employment, investment and spending of customers are very high, we observe an expansion of production, wages and profits are rising. Now because of many customers who are willing to buy a lot of commodities, prices trend to rise. Entrepreneurs feel limitation of recourses and an output level stops going up. Then the economy is "Overheated", and it sinks into a new crisis. p> The cycle is completed. And here comes a new one. p> Of course, the way how business cycles go depends on each situation of different countries. In some of them recessions take no more then a year, but others stay in that phase for 5-10 years. It also depends on what caused the recession. br/>
Causes of the Business Cycles
A lot of economists have conducted researches on what causes the business cycles to take place. Even though we don't have an actual answer to that question. There are about 200 concepts that will describe economic crisis and their cyclicity. All of those concepts are divided into two groups.
At first, the nature of economic cycles is explained by the factors not having anything in common with economic system. They are: political events, psychological problems, solar activity cycles, wars, revolutions, the powerful breakthroughs in techniques and technology.
In particular. One Englishman explains it through the solar activity. An American, G. Moor, was talking about Venus motion rythm. p> Secondly, the cycle is considered as an internal phenomenon, dealing with economics. Internal factors can cause a recession, and the rise in economic activity through certain periods of time. One of the crucial factors is the cyclicity of basic capital. In particular, the beginning of economic boom, accompanied by a sharp increase in demand for machinery and equipment, apparently suggesting that it repeated over a period of time when this technique is physically and mentally worn out.
So, generally there are two types of causes. They are internal and external cause. p> Internal causes:
- political and other events;
- new land discoveries;
- climate conditions;
External causes:
- unstable consumer spending;
- unstable investment rate;
- recourses price changes.
Types and Continuity of the Business Cycles
Short business cycle (Kitchin cycle)
This cycle is believed to be accounted for by time lags in information movements affecting the decision making of commercial firms. Firms react to the improvement of commercial situation through the increase in output through the full employment of the extent fixed capital assets. As a result, within a certain period of time the market gets 'flooded' with commodities whose quantity becomes gradually excessive. The ...
