The term business cycle is referred to the recurrent ups and downs in the level of economic activity that extend over a period of time. The business fluctuations occur in aggregate variable such as national income, employment and price level. The variables nearly move at the same time and in the same direction. However they vary in duration and intensity. The upturns and downturns in the level of economic activity are generally divided into four phases and these are called the phases of the business cycle. There are four phases of business cycle which are generally labelled as Peak, Recession, Trough and Recovery.
The top business cycle is called peak or boom. In the boom period the overall business activity is rising at a more rapid rate. There is a rise in real output and incomes of the people. There is a rise in production, price, employment, wages, interest rates, profits and in the volume of bank credit. The general mood of the businessmen is that of optimism and commercial. The industrial activity both speculative and non speculative shows remarkable expansion. Construction activity gets a big boost. Share markets give handsome gains to the investors. Financial institutions tend to expand credit.
The top business cycle is called peak or boom. In the boom period the overall business activity is rising at a more rapid rate. There is a rise in real output and incomes of the people. There is a rise in production, price, employment, wages, interest rates, profits and in the volume of bank credit. The general mood of the businessmen is that of optimism and commercial. The industrial activity both speculative and non speculative shows remarkable expansion. Construction activity gets a big boost. Share markets give handsome gains to the investors. Financial institutions tend to expand credit.