What is a business cycle? Use the term repression and depression to explain this concept.

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pohnpei397 eNotes educator| Certified Educator

First of all, please note that you are using the wrong word in your question.  “Repression” is a term used in psychology and in political science.  The proper economic term is “recession.”

A business cycle is a cycle in the macroeconomy in which the economy grows, comes to a peak, shrinks, and then hits bottom and starts back up again.  In other words, it is a cycle in which the national economy expands and contracts.

There are a few terms that are typically used when talking about business cycles.  First, there is “expansion.”  This is a time when the economy is growing.  The usual measure of economic growth is real Gross Domestic Product (GDP).  The next part of the cycle is a peak.  This is when GDP growth levels off and eventually stops.  The peak is followed by a recession, also called a contraction.  During this part of the cycle, real GDP declines.  A depression is simply a very bad recession where real GDP declines a lot and unemployment goes up a lot.  There is no set point at which a recession is bad enough to be called a depression.  Finally, the recession or depression ends by hitting a “trough.”  At that point GDP starts to go up again and the cycle begins anew.

malkaam | Student

"Business cycle aka Trade cycle is fluctuations in general business activity that appear through the inter-related fluctuations of any specific cycles."

There are 4 stages of a trade cycle:

  • Boom
  • Recession
  • depression
  • revival

Recession is the time period in which economic activity is low and is facing a decline. During this time period profit margin declines, investment is low which creates a panic situation for the banks and they demand their loans back as a result the firms which are not able to do so declare themselves bankrupt, apart from this output and income also decreases which in turn decreases employment, also the stock market faces a downward trend. 

Depression is the phase of the trade cycle in which net income and employment fall to the lowest possible level and economic activity becomes stagnant.

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