Question

also elaborate the various theories behind the business cycle explain with detail​

Answer 1

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The monetary theory states that the business cycle is a result of changes in monetary and credit market conditions. Hawtrey, the main supporter of this theory, advocated that business cycles are the continuous phases of inflation and deflation.

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The traditional business cycle theorists take into consideration the monetary and credit system of an economy to analyze business cycles. Therefore, theories developed by these traditional theorists are called monetary theory of business cycle. The monetary theory states that the business cycle is a result of changes in monetary and credit market conditions. Hawtrey, the main supporter of this theory, advocated that business cycles are the continuous phases of inflation and deflation. According to him, changes in an economy take place due to changes in the flow of money.

The traditional business cycle theorists take into consideration the monetary and credit system of an economy to analyze business cycles. Therefore, theories developed by these traditional theorists are called monetary theory of business cycle. The monetary theory states that the business cycle is a result of changes in monetary and credit market conditions. Hawtrey, the main supporter of this theory, advocated that business cycles are the continuous phases of inflation and deflation. According to him, changes in an economy take place due to changes in the flow of money.For example, when there is increase in money supply, there would be increase in prices, profits, and total output. This results in the growth of an economy. On the other hand, a fall in money supply would result in decrease in prices, profit, and total output, which would lead to decline of an economy. Apart from this, Hawtrey also advocated that the main factor that influences the flow of money is credit mechanism. In economy, the banking system plays an important role in increasing money flow by providing credit.

The traditional business cycle theorists take into consideration the monetary and credit system of an economy to analyze business cycles. Therefore, theories developed by these traditional theorists are called monetary theory of business cycle. The monetary theory states that the business cycle is a result of changes in monetary and credit market conditions. Hawtrey, the main supporter of this theory, advocated that business cycles are the continuous phases of inflation and deflation. According to him, changes in an economy take place due to changes in the flow of money.For example, when there is increase in money supply, there would be increase in prices, profits, and total output. This results in the growth of an economy. On the other hand, a fall in money supply would result in decrease in prices, profit, and total output, which would lead to decline of an economy. Apart from this, Hawtrey also advocated that the main factor that influences the flow of money is credit mechanism. In economy, the banking system plays an important role in increasing money flow by providing credit.An economy shows growth when the volume of bank credit increases. This increase in the growth continues till the volume of bank credit increases. Banks offer credit facilities to individuals or organizations due to the fact that banks find it profitable to provide credit on easy terms

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