Question

trade cycle - explain in 100 words​

Answer 1

Answer:

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Answer 2

Trade cycles refer to regular fluctuations in the level of national income. It is a well-observed economic phenomenon, though it often occurs on a generally upward growth path and has a variable time span, typically of three years.

In trade cycles, there are upward swings and then downward swings in business. The periods of business prosperity alternate with periods of adversity. Every boom is followed by a slump, and vice versa. Thus, the trade cycle simply means the whole course of trade or business activity which passes through all phases of prosperity and adversity.

In a year of depression, that is, when private investment is at a low ebb, the deficiency in investment will have to be made up by large capital outlay by the state, and conversely, during the upward swing of the cycle, the state will have considerably to cut down its spending programme. Thus, during the depression years, the state must be ready to spend beyond its current revenues. In other words, the state should be prepared to have deficit budgets during depression. Conversely, there should be surplus budgets during the years of prosperity. To put it another way, instead of having balanced budgets every year, the state should aim at budget-balancing over a series of years.

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