Types Of Economic Cycles

Types Of Economic Cycles: this diagram is one of our most searched charts and infographics by people seeking to learn about new things and improve their general knowledge of how the world works.

Types Of Economic Cycles

An economic cycle, also known as a business cycle, refers to the fluctuations in economic activity between periods of expansion and contraction . The cycle is characterized by four stages: expansion, peak, contraction, and trough .

During the expansion stage, the economy experiences relatively rapid growth. Interest rates tend to be low, and production increases. The economic indicators associated with growth, such as employment and wages, corporate profits and output, aggregate demand, and the supply of goods and services, tend to show sustained uptrends through the expansionary stage. The flow of money through the economy remains healthy and the cost of money is cheap. However, the increase in the money supply may spur inflation during the economic growth phase .

The peak of a cycle is when growth hits its maximum rate. Prices and economic indicators may stabilize for a short period before reversing to the downside. Peak growth typically creates some imbalances in the economy that need to be corrected. As a result, businesses may start to reevaluate their budgets and spending when they believe that the economic cycle has reached its peak .

A correction occurs when growth slows, employment falls, and prices stagnate. As demand decreases, businesses may not immediately adjust production levels, leading to oversaturated markets with surplus supply and a downward movement in prices. If the contraction continues, the recessionary environment may spiral into a depression .

The trough of the cycle is reached when the economy hits a low point, with supply and demand hitting bottom before recovery. The low point in the cycle represents a painful moment for the economy, with a widespread negative impact from stagnating spending and income .

There are different types of economic cycles, which are classified based on their duration and characteristics. Some of the most common types of economic cycles include:

– Kitchin cycle: This cycle is the shortest of all economic cycles, lasting around 40 months. It is characterized by fluctuations in the inventory levels of businesses, which can lead to changes in production and employment .
– Juglar cycle: This cycle lasts between 7 and 11 years and is characterized by fluctuations in investment and construction activity. Juglar cycles are often associated with the business cycle and are named after the French economist Clement Juglar .
– Kuznets cycle: This cycle lasts between 15 and 25 years and is characterized by fluctuations in the construction of durable goods, such as housing and infrastructure. The Kuznets cycle is named after the Nobel Prize-winning economist Simon Kuznets .
– Kondratiev wave: This cycle is the longest of all economic cycles, lasting between 45 and 60 years. It is characterized by fluctuations in technological innovation and the development of new industries. The Kondratiev wave is named after the Russian economist Nikolai Kondratiev .