Category: Commerce Notes PPT

Statistics is the representation of a large amount of data in graphs or charts, which helps derive the necessary inference from the same. Because it deals with a lot of data, it becomes necessary to know the prerequisites of collecting that specific data too.

To develop a clear understanding of the same, here we have taken two examples of how data is collected and used.

Primary Data

Suppose you are asked to analyse the amount of electricity consumed in your colony, consisting of 20 different households. So, you go to each house and gather the data yourself and note it down. This is called primary data collection. Herein, you are doing the first-hand job of gathering data from the resources.

Secondary Data

You are asked to make a case study of how the education sector has improved in the last 5 years in India. So, herein you do not go out to every school in India and ask for data. Instead, you look into the government website for the census data for all the necessary parameters.

Therefore, this is the secondary data collection where you do not directly collect data from the people involved in the act. Rather, you use the already collected data to derive other conclusions as asked in your work.

Both these examples of primary and secondary data are necessary to gain insight into how they are collected and how they can be used later.

How do Primary and Secondary Data differ?

The difference between primary data and secondary data is discussed in detail below:

Having a proper understanding of both primary and secondary data is vital for Commerce students. They need to understand that statistics has a vast range of applications in multiple arenas. It is essentially a tool to represent data in a simplified manner.

Various primary data examples reveal that they are most useful in showcasing any data with higher accuracy. As these data are in line with the purpose of collection, one can rest assured to use them in projecting future sales, analysing projects related to capital expenditure, and a lot more.

Similarly, the secondary data examples show that the financial reports, sales data, retailer or distributor, customer statements, etc are used to reach various conclusions. These inferences or conclusions are then projected to meet the purpose of collecting them.

Therefore, having clarity on both will help in differentiating the need for manipulation when you work with a certain type of data.

To know more about the types of primary data and secondary data along with their uses and other necessary details, you can visit our online learning programmes. It has a set of study materials written in an absolute lucid language for a clear and holistic understanding of the syllabus. There are online classrooms for your benefit.

Pros and Cons of Primary Data

For’s

• At the time of data collection, primary data is adapted to the researcher’s needs. The researcher has control over the type of data that is gathered.

• It is more accurate than secondary data. Because the data is not influenced by human judgment, its authenticity may be believed.

• Because primary data is obtained in real-time rather than from old sources, it is frequently up to current.

• The researcher has complete control over the data gathered during primary research. He has the authority to select the design, method, and data analysis techniques to be employed.

• The researcher claims ownership of the data gathered during primary research. He or she may decide to make it public, patent it, or even sell it.

Against

• Primary data is far more expensive than secondary data. As a result, acquiring primary data may be difficult.

• Due to the complexity and time commitment necessary, collecting primary data may not be possible in some circumstances.

• It takes a long time.

Pros and Cons of Secondary Data

For’s

• Secondary data, in comparison to primary data, is more widely available. Secondary data is available on many platforms and may be used by the researcher.

• The cost of secondary data is quite low. Because they are often given out for free, they may be gotten for little to no cost.

• Secondary data collection often takes far less time than primary data collection.

• Secondary data enables longitudinal studies to be undertaken without having to wait a longer amount of time for conclusions.

Against

• Secondary data may not be authentic or trustworthy. A researcher may need to double-check the information gathered from various sources.

• Before eventually identifying the essential data, researchers may have to deal with irrelevant data.

• Secondary data sources are occasionally out of date, with no fresh information to replace the old.

• Because of the data source’s personal bias, some of the data is overstated.

The term Ultra Vires is derived from the Latin word meaning “ beyond the powers of”. The object clause of the Memorandum of Association of the company includes an object for which the company is established. An act of the company should not be beyond the clause else it will be ultra vires and therefore void and cannot be resolved even if all the shareholders of the company wish to resolve. The rectification is not possible even if the shareholders pass a special resolution with the majority of the votes. The doctrine of Ultra vires is said to have originated intending to protect the interest of the shareholders of the company.

What does Doctrine of Ultra Vires Mean?

The term Ultra Vires is derived from the Latin word meaning “ beyond the powers of”. Any transaction or activities beyond the scope of the company or the authority endowed upon the custodian of the company will come under the scope of the doctrine of ultra vires and can be criticized accordingly.

The concept of the doctrine of ultra vires was first introduced in the United Kingdom in 1612. The concept of the doctrine of ultra vires enables the men to determine whether the action is legitimate or illegitimate.  This concept has been elaborated by the judges in various judgments over a given period. In the case, of Sutton Hospital of the year, it was stated that the doctrine of ultra vires will not be applied for any action or transaction of chartered accountant, even though such corporations are corporate personalities with a separate and distinct identity.

In 1612, the companies used the documents known as the “royal charters’ ‘ to incorporate the company and give them a separate and distinct identity from its owners in the eyes of law. Such a royal charter retains similar rights as a natural human being such as the right to sue or to be sued without any physical exhibition. Therefore in the case of Sutton Hospital of the year, even though the company had a separate legal existence in the eyes of law, the doctrine of ultra vires did not apply. This case is considered as an exception to the doctrine of the ultra vires and its scope.

What is the Purpose of Doctrine of Ultra Vires?

The Doctrine of Ultra Vires is introduced to safeguard the creditors and investors of the company. The doctrine of Ultra vires prevents the company from using the money of the investors other than those mentioned in the object clause of the memorandum. Hence, both the investors and company must be assured that their investment will not be used for the objects or activities which they did not have specified at the time of investing money in the company. This ensures that the funds of the investors won’t be dispersed in unauthorized activities by the company. The wrongful use of a company’s assets may result in the insolvency of the company, a situation where the creditors of the company are not being paid. 

The doctrine of the company prevents the wrongful use of the company’s assets thereby protecting the creditors. Also, the doctrine of ultra vires prevents directors from diverting the object for which the company has been formed out, and hence constantly examining the activities of the directors. It helps the directors to know within what lines of business they are eligible to act.

Scope of Doctrine of Ultra Vires

The doctrine of ultra vires applies only to those companies that have been incorporated or have a separate existence in the eyes of law. All those companies that have not been registered such as sole proprietorship or partnership will not fall under the scope of the doctrine of ultra vires. Only the companies that are incorporated or have a separate existence in the eyes of law come under the scope of the doctrine of ultra vires.

Every illegal transaction or abuse of power by directors or employees of a company will not come under the scope of the doctrine of ultra vires. Only the transactions that are beyond the scope of what a  company can do will be liable under the scope of the doctrine of ultra vines. What a company can do or the purpose of the company is always mentioned in the object clause of the Memorandum of  Association of the company. Therefore, if the company is exceeding the authority it has mentioned itself in the object clause of the Memorandum of  Association will be criticized under this doctrine.  

What are the Exceptions to the Doctrine of Ultra Vires?

Following are the few exceptions to the doctrine of ultra vires:

• Any act which is within the scope of the object clause of the company but outside the authorities of directors can be authorized by the directors.

• The shareholders retain the authority to approve an ultra vires act performed in an irregular way in the company.

• If the company acquires any property using an ultra vires investment, even then the company’s right over that property can be defended.

• Any incidental or serious effects of an act shall not be considered as ultra vires unless it is expressly prohibited by the statute.

What are the Consequences of Doctrine of Ultra Vires?

The Doctrine of Ultra Vires’s consequence states that any act done or contract made by the company which goes beyond the powers of the directors and company is completely void and inoperative and hence not binding on the company. By Considering this all, a company can be restrained from using these funds for purposes other than those sanctioned by the memorandum.  Also, it can be restrained from carrying out any trade different from the one it is authorized to carry out.

What are the Effects of Doctrine of Ultra Vires?

Following are the four effects of the doctrine of ultra vires:

Injunction

The members of the company can issue an injunction against the company to prevent it from engaging in any ultra vires activities.

Ultra Vires Contract 

As we know that ultra vires contract is the void ab initio which implies that it cannot be provided with a legal status even by ratification or estoppel. The question here rests on the company’s competency and authority regarding the contract but not its legality.

Liability of The Company

There are no principles regarding the company’s liability against the damages resulting from the ultra vires act. However, the tortious liability may arise if it is verified with the believable explanation that the activity in the duration of which the ultra vires act or the tort occurred falls within the scope of the Memorandum of Association. It occurred during the duration of employment.

Breach of Warranty

The acts that a company cannot perform as mentioned under Memorandum of Association., the directors being the agent of the company are also prohibited from performing such acts. Hence, the contracts that are regarded as ultra vires the company will be void. The directors must act within the scope of the company’s power as contrary actions could hold the directors personally liable for their breach of warranty.

The rate at which the price of goods and services rises is referred to as inflation. Consumer purchasing power is frequently impacted by inflation. Most central banks strive to keep inflation under control in order to keep their economies flowing efficiently. Inflation has both advantages and disadvantages. In this article, we are going to understand Inflation, its causes, & effects. Let us start by learning more about Inflation.

 

Inflation and Its Effects

Inflation can simply be referred to as the increase in the general price level of goods and services. Technically defined as a decliner in the purchasing power of any given currency over some time. The inflation rate or the rate of inflation is the rate at which the value of a currency depreciates. When the value of a currency depreciates and the real value of goods and services remains the same, it causes a rise in prices. 

 

Inflation is defined as a rise in the price of everyday goods and services such as food, housing, clothing, transportation, recreation, consumer staples, and so on. The average price change in a basket of commodities and services over a period of time is used to measure inflation.

 

This fall in the value of currency and rise in the general price level has wide-ranging impacts on production, distribution of wealth, and the economy as a whole. These impacts may be positive or negative, and the impact on groups of individuals can be different. This difference of impact may be due to the rate of change in inflation, the type of assets that the individual holds, and the role that the individual plays in the economy. 

 

Causes of Inflation

The root cause of inflation in an economy is the rise in the money supply. This increased money supply acts as a demand stimulator. As there is more money chasing the same quantity of goods as before, it results in increased demand giving rise to increased prices. The causes of inflation are broadly divided into three categories- Demand-Pull inflation in which the increased money supply in the economy gives rise to increased demand which pulls the prices up, Cost-Push inflation in which the rise in inputs of an economy increases thereby increasing the cost of production leading to increased price level and Built-in- inflation in which the expectation of the stakeholders for the inflation to continue drives the inflation.

 

Effects of Inflation

When a country experiences inflation, the people’s purchasing power declines as the cost of goods and services rises. The value of the currency unit falls, lowering the country’s cost of living. When the rate of inflation is strong, the cost of living rises as well, leading to a deceleration in economic growth.

Effects of Inflation on Production

Effects of inflation are wide-ranging in terms of the type of impact, recipient of impact, or even on the different economic scenarios. As mentioned earlier, the impacts of inflation on production and distribution of wealth are prominent. The impact of inflation on production also depends on the type of inflation. If inflation is a cost-push, then there will be a decline in production as the increase in production cost will hamper the confidence as well as meet the budget constraints of the producer. In demand-pull inflation, there are high chances for an increase in production. The increase in money supply pushes the demand for goods and services up, and this increased demand for existing goods will have a positive impact on the prices. As higher prices are a production incentive, the producers tend to ramp up their production to meet the high demand. The demand-pull inflation also has a short-run positive impact on the stakeholders of production, including the labourers as they tend to receive a higher wage.

 

Effects of Inflation on Distribution of Wealth

The effects of inflation on the distribution of wealth and income are similar to the effect on production, as it affects different stakeholders in different ways. Commonly, inflation leads to an increased income level in the economy. But this increased income goes to a part of the whole population, and the remaining are worsened off. During inflation increases in prices along with the rise in income can be advantageous for some and disadvantageous for others. This is because the income of some increases at a rate higher than the rate of inflation and the remaining people, particularly wage earners and low-income groups, suffer as they cannot keep up with the high rise in prices. 

 

Effects of Inflation on Different Categories of People

The impact of inflation on individuals largely depends on their viewpoint as well as the role they play in the economy and therefore affects different categories of people differently. An entrepreneur gets a mixed bag as he has the opportunity to earn more profit cashing in on the higher prices and higher demand but also has other constraints. These constraints include the rise in wage rates for labourers and the need to pay increased salaries to employees. The entrepreneur also faces an extra burden of higher borrowing costs. This is because the investors expect a higher return for their investment as the value of the currency is declining and the only way to compensate for that is higher income. The increased input prices are also a hindrance to the profit earning objective of firms. To sum up, the firms can enjoy a higher profit in the short run until the wage rate, interest rate, and input prices all increase.

 

Investors tend to gain during inflation owing to the higher profits of the firms. Lenders on the other hand would suffer a bit as they are repaid according to the old interest rate and in real terms, they receive less than what they deserve. The debtors will benefit as they repay less than what they owe in real terms. The debenture holders and bondholders also tend to lose as they get a fixed return and the slumped value of the currency is disadvantageous to them. The salaried class and wage earners are usually on the losing end as the rise in salaries and wages are always lesser than the rate of inflation.

 

To sum up, the general increase in price level also known as inflation affects the production and distribution of wealth in a multi-faceted manner owing to the classification of the type of inflation and the rate of it. Though inflation has a positive effect on production it is not believed to prolong. Inflation also plays a discriminatory role in the distribution of wealth and income, as it makes the rich richer and the poor poorer. Inflation also has very different impacts on different categories of people. 

Entrepreneurship is the dynamic process of developing something new with value by devoting the required time and effort, taking up financial risks and relishing the monetary rewards associated with it. This product may or may not be new, but the entrepreneur has infused its value. He/she has done it by using the skills and resources effectively and efficiently.

An entrepreneur is a person who is responsible for an entrepreneurship venture. Even though it is widely believed that entrepreneurs are born with the necessary skills; however, it is not entirely true, anyone can learn how to become one by undergoing an entrepreneurship development process.

 

What is Entrepreneurship Development?

Entrepreneurship development is the process of enhancing the entrepreneurial knowledge and skills via structured training programmes. It deals with the study of entrepreneurial behaviour, dynamics of business, and its development and expansion. The objectives of entrepreneurship development programmes are to increase the knowledge and skill of existing entrepreneurs and encourage others to become one. Ultimately, it helps in increasing the number of such individuals in an economy.

Entrepreneur development focuses on training individuals who are interested in commencing their venture or expanding their existing one. Furthermore, it concentrates more on encouraging innovation and evaluating the growth potential of an enterprise. This development process helps new firms to perform better and achieve their goals and expand their businesses. As a result, the economy of a nation also improves. Moreover, it enables entrepreneurs to develop and manage their business better along with the financial insecurities associated with it.  

An increase in the rate of development of entrepreneurship ventures alleviates the problem of unemployment in an economy. Additionally, it decreases the issue of stagnation and increases competition in the market. A process like this aims to develop the competence of an entrepreneur and his/her venture. Therefore, it enhances entrepreneurial objectives and encourages more people to become entrepreneurs.

 

Objectives of Entrepreneurship Development Programme

The objective of Entrepreneurship Development programme are listed down here – 

1. To Develop Entrepreneurial qualities and habits among the upcoming youth via the help of proper training and expert counselling.

2. To search and identify the best existing and upcoming business ideas and opportunities.

3. Motivating and guiding various individuals for launching their own new businesses and startups. Thus, becoming a contributor to the economy.

4. To reach risk mitigation to the youth of the nation.

5. Provide and conduct various programmes to spread the idea of Entrepreneurship in rural areas and villages.

6. To generate employment and self-employment with the help of Entrepreneurship and the growth of small scale businesses.

7. To inform about various schemes launched by various Government (central, state or regional governmental bodies) and also about various taxes put on enterprises. 

 

Entrepreneurship Development Process

Every entrepreneurship development process comprises several steps. Here are the vital steps of building an effective development programme to help individuals –

1. Learn about the Business Idea

It is the starting process of entrepreneurship. Once an individual has generated the idea for a business, he/she will subsequently need to evaluate and identify its business opportunities. Hence, he/she has to learn more about the business and its consumers.

However, it is not an easy task. To find relevant information, an entrepreneur has to talk to his/her employees, the marketing team, product designing team, etc. Apart from these, consumer surveys often unearth various new pieces of information. They can help individuals to learn more about their business ideas.

2. Thorough Evaluation

Before moving forward, entrepreneurs need to evaluate a business idea or opportunity thoroughly. It is considered one of the most crucial parts of the Entrepreneurship Development Process. An entrepreneur can do it by himself/herself by considering the following points –

• Whether an opportunity or idea is worth investing in or not.

• What are the requirements for this product?

• Is it feasible or not based on its cost?

• What are the competitive advantages?

• The capital that is required to put in the business, before the launch of that certain product or service. And where to get this capital.

• Associated risks that are inherent with the product or service?. Such risks can be of many types like Technical risks, Economic risks, Social and Environmental Risks.

• Whether it coincides with the company’s goal or not

Additionally, an entrepreneur must evaluate his/her skills and if he/she can manage such it.

3. Business Plan 

After identifying the opportunity and gathering information about it, an entrepreneur needs to create a comprehensive business plan to make most of this opportunity. It is one of the vital stages of the entrepreneurship development process. Such a plan acts as the base of a venture as well as the benchmark. It shows whether the business is on track or not.

Creating a business plan requires time and effort, and an entrepreneur must be dedicated to it. The significant pieces of a business plan, i.e. its vision, goal, objectives, capital and the product itself must be figured out in this process.

4. Finding Resources

Once the entire business plan is ready, the next step of entrepreneurship development and management is to locate sources of finance and human resources. Here entrepreneurs find investors for his/her venture. Moreover, recruits individuals as per their skill and abilities to carry out different business activities. 

Especially the marketing team, as it is the most important aspect for the growth of businesses nowadays. Special care is also needed to find the HR person, who will manage the entire human resource of the company.

5. Framing out the Management Structure

It is a crucial concept of entrepreneurship development. After raising funds and hiring the required employees, this is the next process on the list. An entrepreneur must frame out the hierarchy in the organisation. Thus, it becomes easier to resolve any problem through this chain of command.

6. Plan the Future

Once a business is up and running smoothly, an entrepreneur has to consider its future. In this final point of entrepreneur development programme notes, businesspersons decide the next step of the business. Based on actual data generated by the company and pitting it against the projected one gives a clear idea of how the business is performing. If everything is positive and on track, then an entrepreneur decides to invest in expansion.

In a nutshell, an entrepreneurship development process is about assisting individuals in improving their skill via training. Thus, it aids such individuals to make better decisions in their existing ventures or encourages them to start a new one. Moreover, it is an important topic for commerce students. Additionally, students who want to know more on other topics of this subject can visit the official website of .

Known worldwide for their public meetings of international figures in trade and commerce, the Bretton-Woods Conference, the Louvre Agreement and the Smithsonian Agreement addressed complicated subjects like exchange rates.

The exchange rates of different currencies are fixed differently by different countries in a liberalized and globalized world. An exchange rate is decided by a nation’s policy in a free market. 

In commerce, advanced students need to understand exchange rates and how they fluctuate every day, and sometimes even hourly. It is determined by the exchange rate how many units of one currency can be exchanged for another currency.

There is no single and universal currency in our globalized world despite free and fair trade agreements. All countries dealing in the sale and purchase of goods and services encounter this stumbling block. It wasn’t until the second half of the 20th century, after the Second World War, that exchange rates were introduced.

Intercountry trade grew rapidly, and financial mechanisms were modified accordingly.

How Exchange Rates are Determined

To determine its currency’s exchange rate, every country has its own methodology. Several methods can be used to decide the exchange rate, including fixed exchange rate, managed floating exchange rate, and flexible exchange rate.

Flexible Exchange Rate

It is sometimes referred to as a pegged exchange rate system since governments tend to keep an eye on exchange rates. The currency value is pegged either to certain currencies- either individually or collectively- or to its reserves of gold and foreign currencies.

As far as fixed exchange regimes are concerned, China is probably the most famous example. There was also a fixed rate regime under the former Soviet Union. The exchange rate is not solely determined by market forces under this regime. When the foreign exchange market fluctuates widely, the central banks will sell or buy reserves.

Floating Exchange Rate

An exchange rate that fluctuates or is flexible is called a floating exchange rate. The market determines whether it moves or not. The term “floating currency” refers to any currency subject to a floating regime. The US dollar is an example of a floating exchange currency.

Floating exchange rates are popular among economists. Those who believe in a free market believe that currency value should be determined by the market. USD prices tend to decline when crude oil prices rise, for example. The two are inversely related.

The USD value fluctuates freely since oil prices vary daily.

Economists claim that markets correct themselves frequently. Most major economies are largely dependent on floating exchanges thanks to little government intervention. In popular parlance, these are countries commonly called ‘First World Countries’.

Speculation

Every nation has money as an asset. Indians will care more about the British pound’s value than they would about the rupees if they believe the rupee will go up in value. As a result, when people hold foreign exchange hoping to reap the benefits of rising currency values, the exchange rates are also affected.

Exchange Rate and Interest Rates

Furthermore, the difference between interest rates between nations plays a role in determining the exchange rate. In search of the highest percentage interest rate, banks, MNCs, and affluent individuals move billions of dollars around the globe.

Exchange Rates in the Long Run

Purchasing power parity or PPP can be used to make long-term predictions on the exchange rate in an exchange rate structure which is flexible. As per the theory, if a business has no frontiers to cross such as taxation (tariffs on business) and quotas (quantitative controls on imports), then exchange rates must gradually adjust so that the same products cost the same price regardless of whether you’re translating into rupees in India, yen in Japan, or dollars in the US, apart from the different modes of transportation.

Pegged Float Exchange Rate

There are three hybrid regimes in this system. Governments and Central Banks can control foreign exchange rates by intervening in the markets. However, exchange rates are mostly determined by existing market forces.

There are 3 types:

Crawling Bands:

A central bank will allow fluctuations in a currency until a specific range that is usually set in advance. The authorities will intervene once the range is breached. These ranges are determined by monetary and economic policies.

Crawling Pegs:

As a result of the system, the Central Bank allows its currency to appreciate or depreciate gradually on international markets. The currency will have the capability to float if there are any market uncertainties. However, the authorities will intervene if appreciation or depreciation are swiftly followed by one another. This has already happened in Argentina, Vietnam, and Costa Rica.

Horizontally Pegged Bands:

It resembles crawling bands a bit. Nevertheless, Central Banks allow their currencies to fluctuate much more freely, provided that the exchange rate does not exceed 1% of the gross value of its currency.

The Business Cycle refers to the vast Economic fluctuations in trade, production, and general Economic activities. The Business Cycle is also known as the boom-bust Cycle or Economic Cycle. If we look at it conceptually then, the Business Cycle refers to the up and down movements of the GDP and refers to widespread expansions and contractions in the level of Economic booming and activities. 

The Business Cycle graph is never constant. Depending on the Economic standout, the rise and fall of the curve occur. The features of the Business Cycle have different phases. Business Cycles are identified into four distinct phases: Expansion, Peak, Contraction, and Trough.

What are the Features and Phases of a Business Cycle? 

As mentioned earlier, there are four different phases of the Business Cycle; all these phases have different features of the Business Cycle. 

Expansion: Expansion is characterized by employment increase, Economic growth, and rise in prices.

Peak: Peak is considered to be the highest point in the Business Cycle. A Business Cycle is said to have reached a peak when there is maximum output, employment is full or near to full employment, and inflationary prices are somewhat evident. 

Contraction: Once the peak is reached, the Economy usually enters into the contraction phase. In this phase, the growth slows down and unemployment increases. 

Trough: The contraction then hits the trough point, and it is at this time that the Economy has its bottom. Once again, the Economy will hit bottom, and the next phase of expansion and contraction will start. 

What are the Features of a Business Cycle? 

There are several features of a Business Cycle. Let us take a look at five features of a Business Cycle. 

1. Occurs Periodically: The different phases of a Business Cycle occur from time to time. Although, at certain times, these periods will vary according to the Economic conditions of the industry. This duration may last as long as 10-12 years. The intensity of the phases will also change depending on the Economy. For example, at times, the firm will see massive growth followed by a short span of depression. 

2. Synchronous: Another advantageous and prominent feature of the Business Cycle is that it is synchronic. The features of a Business Cycle are not restricted to a single firm or industry. They originate in a free Economy and are prevalent. If there is any kind of disturbance or Business boom in one industry, it will affect the other firms too. Since different kinds of industries are interrelated, the Business in one firm disturbs that in another firm. 

3. Major Sectors are Affected: It’s been noticed that fluctuations occur not only at the level of production but also in other variables such as employment, consumption, investment, rate of interest, and price level. The investment and consumption of durable consumer goods like houses and cars are continually affected by the periodical fluctuations. As the process of consumption is deferred the courses of the Business Cycle are also affected widely. 

4. Profit Variation: Another significant feature of the Business Cycle is that the profits fluctuate more than any other income source. This makes any kind of Business a tricky and uncertain profession for many. It is difficult to predict Economic conditions. In situations of depression, profits may even become harmful. That is why many Businesses go bankrupt.  

5. Worldwide Impact: Business Cycles are international in nature. If depression occurs in one country, then it is bound to spread to other nations too. This happens mainly because the countries depend on each other for import and export trades. The 1930 depression in the USA and Great Britain shook the entire world and resulted in a recession. 

Fun Facts About Business Cycles

• Business Cycles are an aggregate phenomenon. They do not affect a single Economic activity but several Economic variables. 

• Expansions and recessions accompany Business Cycles. 

• Although Business Cycles are recurrent, they are not periodic. They often occur at regular intervals but not at a fixed duration. It is therefore tough to predict times of recession. 

• The expansion and contraction phases can have different durations. The amplitude of both phases doesn’t need to be the same or equal. 

Business Cycle Characteristics

There is no such thing as a straight line in any Economy. They all go through Cycles of Economic expansion and decline. The Economic climate is extremely dynamic, and it has a considerable impact on Business enterprises. There are some traits that all of these Business Cycles have in common. So, let’s have a look at the characteristics of Business Cycles.

Cycle of Business

The Business Cycle is the natural expansion and contraction of goods and service production and output over a period of time. It can be defined as the rise and collapse of a Business in the Economy.

It is, above all, a tool for understanding the firm’s and the Economy’s Economic conditions. This analysis can be used by the company to make appropriate policy adjustments.

Business Cycle Phases include:

Business Cycles have various phases, which may be studied to learn more about their underlying causes. These phases have been referred to by various economists under various titles.

The Following Business Cycle Phases Have Been Identified In General:

1. Expansion is number one (Boom, Upswing or Prosperity)

2. The pinnacle (upper turning point)

3. Reduction in size (Downswing, Recession or Depression)

4. Lower turning point

In Fig. 13.1, the four phases of Business Cycles are depicted, beginning with the trough or depression, when Economic activity, i.e., production and employment, is at its lowest point.

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The Economy enters the growth phase with the revival of Economic activity, but owing to the reasons stated below, the expansion cannot last indefinitely, and after reaching its peak, contraction or downswing begins. We have depression when the contraction picks up speed.

Business Cycle Characteristics

Expansion, peak, depression, and recovery are the four stages of a Business Cycle. While each phase has its own distinct traits, there are some aspects that are shared by all stages. Take a look at these characteristics of Business Cycles.

Business Cycle Features:

1. Business Cycles occur on a regular basis. They feature identifiable phases such as expansion, peak, contraction, depression, and trough, albeit they do not show the same regularity. In addition, Cycle duration varies greatly, from a minimum of two years to a maximum of 10 to twelve years.

2. Business Cycles are also synchronised. That is, they have an all-encompassing nature and do not affect just one industry or area. Depression or contraction, for example, might occur in any industry or sector of the Economy at the same time.

3. Finally, changes have been found not only in the level of output but also in other variables such as employment, investment, consumption, interest rate, and price level.