n lation and        siness      le     7.25
                                             BusIness CyCle
                                                                the business cycle. We intend here to understand
                                                                the actual meanings of each of the stages.
     The discussion on growth and development has               Economists have pointed out that the business
     shown their internal interdependence. If the               cycle is characterised by four phases or stages in
     quality of life in an economy is to be enhanced,           which economies alternate:
     there is a need of conscious public policy which                 (i) Depression
     can spend and invest in areas like food, nutrition,
                                                                     (ii) Recovery
     health, education, shelter, social security, etc.
     But for such expenditures and investments, the                (iii) Boom
     economy needs equitable level of income, too.                  (iv) Recession
     The income enhancement in any economy takes
     place via increasing the level of production in the           depressIon
     economy, i.e., real gross national product (GNP).
     It means, development requires higher growth,              Though depression has visited the world economy
     i.e., higher levels of economic activities. With           only once in 1929, economists have pin-pointed
     the help of suitable kind of economic policies,            enough number of traits to recognise it. The
     the government of an economy keeps trying to               major traits of depression could be as given below:
     maintain a higher level of economic activity. But,               (i) an extremely low aggregate demand in the
     at times, economy keeps failing in this objective.                     economy causes activities to decelerate;
     And, thus economies fluctuate between the best                  (ii) the inflation being comparatively lower;
     and the worst levels of economic activities which
                                                                   (iii) the employment avenues start shrinking
     is known in economics as boom and depression,
     respectively. They can be called different phases                      forcing unemployment rate to grow fast;
     of the economic activities of the economies. In                (iv) to keep the business going, production
     between boom and depression, there might be                            houses go for forced labour-cuts or
     many other situations of the economic activities,                      retrenchment (to cut down production
     such as—stagnation, slowdown, recession and                            cost and be competitive in the market,)
     recovery. The fluctuations in the level of economic                    etc.
     activity between the depressions and booms has                   The economic situations become so chaotic
     been called by the economists as business cycle or         in the phase of depression that governments have
     trade cycle with recession and recovery as the main        almost no control over the economy. The Great
     intermediate stages.75 Stagnation76 and slowdown           Depression of 192977 gave rise to the ideas of strong
     may be considered as other intermediate stages of
                                                                  77.    A very lively description of the Great Depression has
       75.  Collins internet-linked Dictionary of Economics,             been presented by Lee Iacocca in his autobiography.
            Glasgow, 2006 & Oxford Business Dictionary,                  This is known as the Great Depression due to its
            N. Delhi, 2004.                                              length and depth—the economies could recover fully
       76.  Simon Cox (ed.), Economics (London: The Economists,          out of it only by the mid-1940s (Stiglitz and Walsh,
            2007), p. 60.                                                p. 495).