Page 219 - DECO402_Macro Economics

Macroeconomic Theory

Notes kind of cycles never happened. In this way trade cycles are recurring up and down in total income,
production and price–level.

24.1 Types of Trade Cycles

Trade cycles are generally divided in the below mentioned groups:
1. The Short Kitchin Cycle: It is also known as mini-cycle(laghu chakra) which is approximately
of 40 months. It is famous by the name of British economist Joseph Kitchin who in 1923
had presented the difference between small and big cycle. He, on the basis of his research,
reached this conclusion that large cycle is of two- three cycles of 40 months.
2. The Long Juglar Cycle: This cycle is also known as large cycle. It may be defined like this
“It is up and down of trade activities between successive crisis. "In 1862, French economist
Clement Juglar had told that periods of prosperity, crisis and liquidation always come one
each other in the same sequence. Modern economists have reached this conclusion that
duration of Juglar cycle is on an average of nine and half years.
3. The very Long Kondratieff Cycle: In 1925, Russian economist Kondratieff reached this
conclusion that there are very long waves of cycles whose durations are more than 50 years
and which are made of six Juglar cycles. Very long cycle came to be known as Kondratieff
cycle.
4. Building Cycle: Such types of cycles are those which are related to construction of buildings
and whose duration is very regular. Their duration is double of large cycles and is on an
average of 18 years. Such cycles are related to two American economists names Warren
and Pearson who had reached this conclusion presented in the book named World Price and
Building Industry, 1937.
5. Kuznets Cycle: Famous American economist prof. Simon Kuznets, established a type of cycles
named long term secular swing of 16-22 years; which was presented in such a manner that
it makes the 7-11 years cycle comparatively unimportant. It started to be known as Kuznets
cycle.

Notes Trade cycle is a part of capitalistic economy. It is related to cyclical booms and
depressions.

Self Assessment

Fill in the Blanks:
1. Trade cycle is .................. of periods of prosperity and depression of good or bad trade.
2. Trade cycles are recurring ..................... in total income, production and price–level.

24.2 Phases of Trade Cycle

A specific cycle is generally divided in four phases:
1. Expansion or Prosperity or Upswing

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