If there are aberrations — “hiccups” in the trend — you can look for explanations, which could include price, weather or demographic changes. When once the upward movement starts, it creates further movement in the same direction by feeding on itself. Q 1 Define the term Business Cycle and also explain the phases of business or trade cycle in brief? A central feature of monopolistic competition is that products are differentiated. Production schedules by firms are curtailed, workers are laid off and outstanding orders for raw materials are cancelled. Progressive tax: Progressive tax says that higher the level of income, greater the volume of tax burden you have to bear. Ask your question. This is because workers’ unions strongly oppose wage reductions. As this limit is reached, they start recovering their loans. Which of the following is a characteristic of the prosperity phase of the business cycle? The economic system, left to itself is likely to stagnate in the state of depression for an intolerably long period for the working class. Free resources to assist you with your university studies! Third-degree price discrimination is differential pricing to different groups of customers. Low income group people pay low tax, whereas the high income group people pay higher tax. Buying pattern of individuals will be different. Content Guidelines 2. Ans: The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.Diagram of Business Cycle (or Trade Cycle) :-. C. Car dealerships cannot sell their stock. Automatic Stabilizer: The tax structure and expenditure are programmed in such a way that there is increase in expenditure and decrease in tax in recession and decrease in expenditure and increase in tax revenue in the period of inflation. Process of Business Cycle is cumulative and self-reinforcing, 5. It is very important since it refers to the budgetary policy of the government. Characteristics or Business Cycles 3. This movement will persist till the forces accumulate to alter the direction and create the downward movement. These phases of business cycles are shown in the following: 1. a) Direct tax includes income tax, corporate tax, taxes on property and wealth. Recovery shows the upturn of the output and employment of the economy from the state of depression. Again the business cycle continues similarly with ups and downs. .Here is all you need to do:Starting NOW: Bring change!Give it to your ... the characteristic features of a depression are the reverse of prosperity: ... A business cycle is a complex phenomenon which embraces the entire economic system. Which of the following is a characteristic of the prosperity phase of the business cycle? The decline in economic activity is not, of course, uniform. When there is depression, the income decreases and many people fall in the no-income-tax bracket and the tax revenue decreases. The upward movement and downward movement are cumulative in their process. Generally, prices and production fall or rise together. Proportional tax: When the tax imposed is irrespective of the income you earn, every income group, high or low pay the same amount of tax. The Great Depression of 1929 is an example of this. Include the owner, sales manager, accountant, attorney and any others whose opinion you value. This is because the producers are not prepared to lift off the supplies of the raw materials which causes a sharper fall in their prices than the prices of manufactures. jonathanfelfoldy jonathanfelfoldy 04/09/2020 Business Middle School +9 pts. For example, small businesses in construction-related work can look to housing starts, building permits, loan applications and interest rates for solid indicators of the future. The government has to pursue stabilisation policies and show special initiatives in dispelling the pessimistic mood of the investors. Firms operating under monopolistic competition usually have to engage in advertising. Which best describes how a recession develops as demand and production decrease? As investors become more confident, expanding productive activity takes the economy to a boom or prosperity phase. hZm9pt, Today we are going to make promotions for the CONE Fundraiser. Tax comes under two headingu2013Tax on individual(direct tax) and tax on commodity (indirect tax or commodity tax). When a downward movement starts, it persists in the same direction leading to the worst depression and stagnation till it is retrieved to gain an upward movement. It includes sales tax, excise duty and custom duties. Which of the following is a characteristic of the prosperity phase of the business cycle? Low income people will pay more and high income people will pay less. The whole process becomes self-reinforcing. Marketing differentiation, where firms try to differentiate their product by distinctive packaging and other promotional techniques. There is a steady rise in output, income, employment, prices and profits. Check all that apply. Which of the following is a characteristic of the prosperity phase of the business cycle? Direct tax structure can be divided into three bases-. In this case, the firm incurs a smaller loss by producing some output than by not producing any output. Join now. Phases of Business Cycle : A business cycle has five different phases. Most firms reduce their output and as such are forced to lay-off workers. In this way the wave of pessimism gets transmitted to other sectors of the economy. As effective demand increases, income rises faster than before. Prices decline because of the expectations of producers in general that these would continue to fall in spite of all governmental efforts. As effective demand increases, income rises faster than before. jonathanfelfoldy jonathanfelfoldy 04/09/2020 Business Middle School +9 pts. This has a multiplier effect. Do you have a 2:1 degree or higher? Study for free with our range of university lectures! During the recovery phase, rise in output and incomes of the people induces substantial increase in aggregate spending. Generally, recession lasts for a short period. For example, breakfast cereals can easily be differentiated through packaging. 2. The end to prosperity phase comes because of certain tendencies in the private-enterprise economy prevalent during the boom conditions. According to Haberler, prosperity is “a state of affairs in which the real income consumed, real income produced and the level of employment are high or rising, and there are no idle resources or unemployed workers or very few of cither”. Secondly, expansion of production is hampered by shortages of some inputs and bottlenecks in production. 4. recovery. What Are the Characteristics of Each Stage of the Business Cycle?. A slump or depression shows itself first in a substantial decline in general output and employment. Begin with an analysis of the marketplace, reviewing the economic conditions. Not only does this make it more difficult to build a historical database, it accentuates the need to forecast correctly. Boom or Prosperity: During the recovery phase, rise in output and incomes of the people induces substantial increase in aggregate spending. However, they cannot fully appreciate the restaurant or the meal until after they have dined. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute.In a monopoly market, factors like government license, ownership of resources, copyright and patent and high starting cost make an entity a single seller of goods. Effects 6. 4. It must be pointed out here that a non-intervention policy from the government fails to start the recovery phase. 4. Fluctuations will spread throughout, as industries are interconnected and the cyclical fluctuations tend to be international in the sense that the prosperity or adversity will affect the foreign countries, through international trade.