Monday, February 8, 2010

Characteristics of Trade Cycle

The occurring of different type of change in the economic is known as trade cycle. Regular change in the economy creates fluctuations in the economic equilibrium. Such regular and continuous changes in the economy are the feature of the trade cycle. But all sorts of changes cannot be termed as trade cycle. Only regular and continuous changes come under trade cycle. On the basis of these facts, the main characteristics of trade cycle can be expressed as follows:
1. Cyclical nature
The nature of trade cycle is generally cyclical. That is, after the creation of trade cycle the ups and downs fluctuations will be of recurrent and repetitive pattern. As a result, in the economy depression occurs after the state of prosperity after the state of depression continuously and cyclically.
2. Regularity
Some of the economists have given the views that there is regularity or periodicity in the fluctuations of the trade cycle or the state of prosperity and the state of depression occurs and completes in a fixed period. According to the economist Hanson, the general time period of the trade cycle is from 7 years to 10 years. In reality, business cycles are recurrent but not periodic. Therefore, span of trade cycle need to be identical or the same.
3. wave-like movement
Movement of the trade cycle is just like the sea-waves. In capitalistic economy depression after prosperity and prosperity after depression occur in wave-like movement. Among these the movement of wave sometimes is excessively powerful and sometimes is less powerful. But whatever be the movement of the wave, the movement of one wave will be similar to the movement of the other wave.
4. International
In modern economy, the nature of trade cycle becomes international. So, trade cycle starts at one section of the economy and expands throughout the country, then through the means of international trade it expands from one country to the other. Thus, in this, one directs the other.
5. Cumulative nature
The state of prosperity and the state of depression that occur in the trade cycle are of the cumulative nature. What is shown by this is that, all states will cumulates such state which will direct this towards the opposite direction. Thought the states of prosperity and depression are not definite, both the states can continue being indefinite. As a result of this, one directs the other.

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