Types and duration of economic cycles. The cyclical nature of the market economy
In fact, the development of the economy does not occur in a straight line (trend), which determines economic growth, but with a constant deviation from the trend, with ups and downs, i.e. cyclically (Fig. 1). Business or economic cycles (business cycle) - periodic ups and downs in the economy, as well as fluctuations in business activity. These fluctuations are unpredictable and irregular, so the term "cycle" is used rather conditionally here.
The cycle has two extreme points:
- Peak point, which corresponds to the maximum business activity.
- The bottom point (trough), corresponding to the minimum of business activity, i.e. maximum decline.
As a rule, economic cycles are divided into two phases. The first phase is called the phase of decline or recession (recession) and it lasts from peak to bottom. With a long and deep recession, depression occurs. The second phase is called the recovery or recovery phase, and it continues from the bottom to the peak.
In addition, there is another approach that divides business cycles into four phases. However, extreme points are not singled out here, since it is believed that when the economy reaches a maximum or minimum of business activity, it is in this state for a sufficiently long period of time. So:
- Phase I - boom (boom), is characterized by maximum activity in the economy. This is a period of overemployment and inflation. In this state, the economy is called "overheated" ("overheated economy").
- Phase II - recession (recession or slump), is characterized by a gradual return of the economy to the trend level, a reduction in the level of business activity, the actual GDP approaching its potential level and falling below the trend, which brings the economy into the third phase.
- Phase III - crisis (crisis) or stagnation (stagnation). There is a review gap in the state of the economy, in which actual GDP is lower than potential. This period is characterized by underutilization of economic resources, i.e. high unemployment.
- Phase IV - recovery or recovery, in which the economy begins to gradually recover from the crisis, and the actual GDP grows to the potential level, after which it exceeds it, trying to reach a maximum, which returns the situation to the first phase.
Causes of the business cycle
In economic theory, it is noted that economic cycles arise due to a variety of phenomena: the level of solar activity, revolutions, military coups, presidential elections, high population growth, insufficient consumption, investor sentiment, price shocks, technical and technological innovations, and much more. In fact, all the reasons ever listed can be combined into one - the mismatch between aggregate demand and supply, as well as aggregate spending and output. In this regard, the cyclical development of the economy can be explained by several aspects. First, it is a change in aggregate demand with a stable value of aggregate supply. Secondly, this is a change in aggregate supply with a stable value of aggregate demand.
Let us assume that economic cycles arise due to changes in aggregate demand or expenditure. Consider an example of how these indicators will behave in each phase of the cycle (Fig. 2. (a)).
The boom phase is characterized by the onset of a moment at which it will not be possible to sell the entire volume of production produced, i.e. total spending will be lower than output. As a result, overstocking appears, which leads to an increase in stocks at enterprises. This, in turn, leads to a curtailment of production, which causes layoffs of workers and an increase in unemployment. As a result, total income and, consequently, total expenditure decreases. First of all, such economic cycles are manifested in a decrease in demand for durable goods and a fall in the demand of enterprises for investment, which leads to a decrease in the short-term interest rate. Typically, in such circumstances, the long-term rate is increased by selling bonds in an environment of reduced income and a shortage of cash. A decrease in total income reduces tax revenues to the state budget, which leads to an increase in the size of state transfer payments and a state budget deficit. Businesses try to sell their products by lowering prices, which leads to deflation.
Soon, enterprises are faced with a situation where products are not sold even at lower prices. In this case, the company may resort to several solutions. Firstly, this is the acquisition of more productive equipment, which will allow the production of goods to continue at lower costs. Thus, the company will be able to reduce the price of products, thereby not reducing the amount of profit. Secondly, the enterprise can be engaged in the production of a new type of goods, which requires technical re-equipment. In both cases, an increase in demand for capital goods can be achieved, which will allow for the expansion of production in industries that produce capital goods. As a result, there is a revival in this area, which leads to an increase in employment, an increase in the profit of the enterprise, and an increase in total income. As incomes rise, so does the demand in industries that produce consumer goods, and the production of these goods also expands. These processes gradually cover the entire economy. Thus, economic cycles move into a boom phase.
With the growth in demand for durable goods and investments, the cost of credit rises, i.e. an increase in the short-term interest rate. At the same time, there is a decrease in the long-term interest rate, as the demand for bonds increases and prices for securities rise. The price level is rising. Tax revenues are increasing. Reduced transfer payments. The government budget deficit is shrinking, allowing for a surplus. With the recovery of the economy and the growth of business activity, economic cycles move into a phase of "overheating" of the economy, which leads to another recession.
So, economic cycles are based on changes in investment spending, since investment is the most volatile part of total spending (aggregate demand).
In Figure 2, business cycles are represented graphically by means of the AD-AS model. Figure 2(a) depicts a business cycle with a change in aggregate demand (total spending), while Figure 2(b) shows a business cycle with a change in aggregate supply (total output).
It should be noted that in conditions when the reason for the recession in the economy is a decrease in aggregate supply, basically all indicators behave in the same way as in the case of a reduction in aggregate demand (aggregate expenditure). The exception is the general price level, which rises as the recession deepens. This situation is called "stagnation" and is characterized by a simultaneous decline in production and an increase in the price level. As a rule, they get out of such a recession through investments that increase the stock of capital in the economy and allow aggregate supply to grow.
Business Cycle Indicators
The rate of growth (g) is the main indicator of the phases of the cycle. Its calculation is carried out according to the following formula:
g = [(Yt - Yt1) / Yt1] x 100%, where
Yt is the real GDP of the current year,
Yt1 is the real GDP of the previous year.
Thus, economic cycles are characterized by this indicator as a percentage change in real GDP in each subsequent year compared to the previous one. If this value is positive, then economic cycles are in the upswing phase; otherwise, they are in the downswing phase. This indicator is calculated once a year, and the value is used to characterize the pace of economic development.
In addition, economic cycles in different phases are characterized by different indicators that depend on the behavior of economic quantities. Among them are:
- Pro-cyclical indicators that rise during the boom phase and fall during the recession phase (sales, total income, real GDP, firm profits, imports, transfer payments, tax revenues).
- Counter-cyclical indicators that rise in the recession phase and fall in the recovery phase (the value of the stocks of firms, the unemployment rate).
- Acyclic indicators, the value of which is not related to the phases of the cycle, since they do not have a cyclical nature (export volume, depreciation rate, tax rate).
Types of economic cycles
Economic cycles are classified according to their duration:
- centennial cycles, whose duration is one hundred or more years;
- "Kondratiev cycles" that last 50-70 years. They got their name from the outstanding Russian economist N.D. Kondratiev, who developed the theory of "long waves of economic conjuncture";
- classical cycles lasting 10-12 years and characterized by massive renewal of fixed capital;
- Kitchin cycles, whose duration is 2-3 years.
Thus, economic cycles differ into different types based on the duration of the functioning of one or another physical capital in the economy. For example, centennial cycles are determined by the emergence of scientific discoveries and inventions that make a real revolution in production technology. Long-wavelength Kondratiev cycles are based on the service life of industrial and other structures and buildings, i.e. on the passive part of physical capital. "Classic" cycles are characterized by a duration of 10-12 years, during which the physical deterioration of equipment is observed, i.e. active part of physical capital. It is worth noting that modern conditions put in the first place when replacing equipment not physical, but moral depreciation. In other words, over time, more productive and sophisticated equipment appears, as a result of which there is a need to replace obsolete equipment. As a rule, new technical and technological solutions are developed every 4-6 years, but this cycle is gradually shortening. Also, many economists note that economic cycles in duration depend on the massive consumer renewal of durable goods, which occur at intervals of 2-3 years.
In the modern economy, it is noted that economic cycles at the present time can be very diverse in terms of the duration of the phases and the amplitude of fluctuations. First of all, it depends on the causes of the crisis and the characteristics of the economy of a particular country (the degree of state intervention, the share and level of development of the service sector, the nature of economic regulation, the conditions for the development and application of the scientific and technological revolution).
It is very important to distinguish between cyclic and non-cyclic oscillations. In this regard, economic cycles are characterized by a change in all indicators and coverage of the entire industry or sector. In turn, non-cyclical fluctuations are accompanied by a change in business activity only in certain industries that are seasonal in nature, and only some economic indicators change.
The business cycle is cyclical changes in the economic environment, periodic fluctuations in the level of business activity (levels of employment, production and inflation), represented by real GDP. Thus, under the economic cycle is meant the period of economic development between two identical states of the conjuncture
In macroeconomics, there is no unified theory of the economic cycle; researchers pay attention to different causes of cyclicity. But most economists propose to study this phenomenon through an analysis of external and internal factors that affect the nature of the cycle, its duration, and the specifics of the manifestation of individual phases.
In the structure of the cycle, the highest and lowest points of activity and the phases of decline and rise lying between them are distinguished. The total cycle duration is measured by the time between two adjacent activity troughs. Accordingly, the duration of the decline is the time between the highest and subsequent lowest points of activity, and the rise is the opposite.
The economic cycle is divided into four phases:
1. Recession In this stage, production declines, growth rates become negative, unemployment rises and aggregate demand falls. The moment of crisis in the economic cycle for most participants in economic activity is unexpected, so it is always destructive. At this stage, the market is overstocked with goods as demand shrinks, but production continues at the same pace, causing inventory to build up. During a crisis, securities prices fall and enterprises are massively closed - first of all, credit institutions are liquidated, since during a crisis they suffer acutely from mass loan defaults.
2. Depression. National income continues to decline, but the rate of decline is slowing down. The economy, as it were, is frozen in the state it reached during the recession. In depression, against the background of general stagnation, only the value of the loan interest is rapidly changing. It falls because the "surviving" capitalists have free cash as a result of low production costs. Wages are fixed at the lowest point.
3. Revitalization. The transition from a decline in production to its increase; gradual return of the economy to a state corresponding to equilibrium growth. The fact is that in a state of depression commodity stocks and prices stabilize. Low prices stimulate consumption, demand. And not just for commodities. The crisis showed the technological and technical failure of fixed capital. Its replacement begins - the renewal of capital, which means that the phase of revival and the gradual growth of the economy has begun. The revival phase is characterized, first of all, by the expansion of the production of means of production. Consequently, the revival impulse begins with enterprises producing equipment, elements of fixed capital. Then, slowly but surely, a picture emerges that is the reverse of the crisis: production expands following the growth in demand, unemployment decreases, and wages rise.
4. Expansion The national income is growing despite full employment. The demand for investment increases, unemployment falls below the natural level. The price level, the wage rate and the interest rate rise. The inevitable consequence of this development is the transition from growth to decline. The criterion for the transition of the economy from recovery to recovery is the achievement of the pre-crisis level of production.
Types of economic cycles:
short-term Kitchin cycles (characteristic period - 2-3 years). Kitchin himself explained the existence of short-term cycles by fluctuations in world gold reserves, but in our time such an explanation cannot be considered satisfactory. In modern economic theory, the mechanism for generating these cycles is usually associated with time delays (time lags) in the movement of information that affect the decision-making of commercial firms .;
medium-term Juglar cycles (characteristic period - 6-13 years) Within the framework of Juglar cycles, fluctuations are observed not only in the level of utilization of existing production capacities (and, accordingly, in the volume of commodity stocks), but also fluctuations in the volume of investments in fixed capital. As a result, in addition to the time delays characteristic of Kitchin cycles, there are also time delays between making investment decisions and the construction of the corresponding production facilities (and also between the construction and actual launch of the corresponding facilities). An additional delay is also formed between the decline in demand and the elimination of the corresponding production capacities.;
Kuznets rhythms (characteristic period - 15-20 years) Kuznets associated these waves with demographic processes, in particular, the influx of immigrants and building changes, so he called them "demographic" or "building" cycles. However, modern researchers consider the rhythms of the Smith as technological, infrastructural cycles, within their framework, a massive update of the main technologies takes place;
long waves of Kondratiev (characteristic period - 50-60 years) Kondratiev explained the existence of large cycles by different periods of functioning of different economic goods, the production of which also needs to spend different times. Especially - to accumulate capital for their creation. So big cycles arise on the basis of the accumulation of capital to create new infrastructure. This main cause is superimposed by others, secondary ones. The essence of fluctuations is that the infrastructure of the economy must be in balance with all its other parameters, which are peculiar to it at this particular level of development. Violation of this balance means the beginning of a cycle. The frequency of repetition is 45-50 years, as determined by Kondratiev based on the analysis of statistical material. The theory of long, or large, cycles is of particular importance, as it makes it possible to predict the development of the market system far ahead, in the future, and, therefore, increase its adaptability, absorbing future shocks.
(characteristic period - 6-13 years);
Phases
There are four relatively distinct phases in business cycles: peak, decline, bottom (or "trough"), and rise; but to the greatest extent these phases are characteristic of Juglar cycles.
Business cycles in economics
Rise
Rise occurs after reaching the lowest point of the cycle (bottom). It is characterized by a gradual increase in employment and production. Many economists believe that low inflation rates are inherent in this stage. There is an introduction of innovations in the economy with a short payback period. Demand deferred during the previous recession is realized.
Peak
Peak, or the top of the business cycle, is the "high point" of an economic recovery. In this phase, unemployment usually reaches its lowest level or disappears altogether, production facilities operate at maximum or close to it load, that is, almost all material and labor resources available in the country are involved in production. Usually, though not always, inflation increases during peaks. The gradual saturation of markets increases competition, which reduces the rate of return and increases the average payback period. The need for long-term lending is growing with a gradual decrease in the ability to repay loans.
recession
The concentration (monopolization) of capital leads to "erroneous" decisions on the scale of the economy of the country or even the world. Any investor seeks to receive income from his capital. The investor's expectation of this return comes from the boom-peak stage, when returns are at their highest. At the stage of recession, the investor considers it unprofitable for him to invest in projects with a yield lower than “yesterday”.
Without such investments (investments), production activity is reduced, as a result, the solvency of workers in this area, who are consumers of goods and services in other areas. Thus, the crisis of one or several industries is reflected in the entire economy as a whole.
Another problem of capital concentration is the withdrawal of the money supply (money) from the sphere of consumption and production of consumer goods (also from the sphere of production of the means of production of these goods). Money received in the form of dividends (or profits) is accumulated in the accounts of investors. There is a shortage of money to maintain the required level of production, and as a result, a decrease in the volume of this production. The unemployment rate is growing, the population is saving on consumption, and demand is falling.
Of the sectors of the economy, the services and non-durable goods sectors are somewhat less affected by the devastating effects of the economic downturn. The recession is even boosting some activities, such as boosting demand for pawnshops and bankruptcy lawyers. Firms that produce capital goods and consumer durables are most sensitive to cyclical fluctuations.
These firms are not only the hardest hit in the downturn, but also the most benefit from the recovery in the economy. There are two main reasons: the possibility of postponing purchases and the monopolization of the market. The purchase of capital equipment can most often be deferred to the future; in difficult times for the economy, manufacturers tend to refrain from purchasing new machinery and equipment and building new buildings. During an extended downturn, firms often choose to repair or upgrade outdated equipment rather than spend heavily on new equipment. As a result, investment in capital goods declines sharply during economic downturns. The same applies to consumer durables. Unlike food and clothing, buying a luxury car or expensive home appliances can be put off until better times. During economic downturns, people are more likely to repair rather than replace durable goods. Although food and clothing sales tend to decline as well, the decline is usually smaller than the decline in demand for durable goods.
Monopoly power in most industries producing capital goods and consumer durables is due to the fact that the markets for these goods are usually dominated by a few large firms. Their monopoly position allows them to keep prices steady during economic downturns by reducing production in response to falling demand. Consequently, the fall in demand has a much greater impact on production and employment than on prices. A different situation is typical for industries that produce consumer goods. When demand falls, these industries usually respond by lowering prices in general, since no single firm has significant monopoly power.
History and long cycles
Business cycles are not truly "cyclical" in the sense that the length of the period from, say, peak to peak has fluctuated significantly throughout history. Although economic cycles in the United States lasted an average of about five years, cycles have been known to last from one to twelve years. The most pronounced peaks (measured as a percentage increase above the economic growth trend) coincided with the great wars of the 20th century, and the deepest economic recession, excluding the Great Depression, was observed after the end of the First World War. It should be noted that along with the described economic cycle, the theory also distinguishes the so-called. long cycles. Indeed, at the end of the 20 The US economy appears to have entered a prolonged recession, as evidenced by some economic indicators, notably the level of real wages and net investment. Nevertheless, even with a long-term downward trend in growth, the US economy continues to grow; although the country recorded negative GDP growth in the early 1980s, it remained positive in all subsequent years except 1991. Symptomatic of the long-term downturn that began in the 1960s is the fact that, although growth has rarely been negative, the level of economic activity in the US since 1979 has hardly ever exceeded the trend growth rate.
Notes
see also
- Noorhythms
Literature
- Kondratiev N. Large cycles of conjuncture and the theory of foresight. Selected works / M. : Economy, 2002
- ASCAR AKAEV: Modern financial and economic crisis in the light of the theory of Kondratieff cycles
Links
- Economic cycles // Online Encyclopedia "Krugosvet"
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See what "Economic cycles" are in other dictionaries:
A term that refers to regular fluctuations in the level of business activity from an economic boom to an economic downturn. There are four distinct phases in the business cycle: peak, decline, bottom or trough, and rise. Peak, or peak ... ... Collier Encyclopedia
Business Cycles and National Income (eng. Business Cycles and National Income, 1951) is a product of the American economist E. Hansen (1887 1975). Contents 1 Structure 2 Contents ... Wikipedia
- (Eng. Business Cycles and National Income, 1951) - the work of the American economist E. Hansen (1887 1975). Contents 1 Structure 2 Contents 3 Translations 4 ... Wikipedia
Economic cycles Cycle name Characteristic period Kitchin cycle 3 4 years Juglar cycle 7 11 years Kuznets cycle 15 25 years Kondratiev cycle 45 60 years Kondratiev cycles (K cycles or K waves) periodic cycles of the modern world economy ... ... Wikipedia
Economic cycles Cycle name Characteristic period Kitchin cycle 3 4 years Juglar cycle 7 11 years Kuznets cycle 15 25 years Kondratiev cycle 45 60 years Juglar cycles are medium-term economic cycles with a characteristic period of 7 11 years. Named after ... ... Wikipedia
In this topic, it is necessary to understand the causes of fluctuations in economic activity in the short term and the ability of the state to prevent a decline in production.
1. Types of economic cycles and their causes.
2. Economic cycle and its characteristics.
3. State countercyclical regulation.
Any market system is subject to cyclical fluctuations, which are expressed in periodic ups and downs not only in industrial production, but also in the development of the economy as a whole. These changes in the economic conjuncture called macroeconomic instability or the cyclical development of a market economy, which are characterized by the following features: the presence of fluctuations, i.e., a change in positive dynamics (growth) to negative dynamics (decline); periodicity of oscillations, i.e., wave-like dynamics, expressed through oscillations following one after another; the presence in the oscillations of a repeating unit - a cycle.
Business cycle- this is the period of time during which there is a recession and rise in economic (business) activity.
It should be noted that cyclic fluctuations, which are periodic in nature, must be distinguished from trend - long-term trend of economic development. This difference can be represented graphically (Fig. 27), where cyclic fluctuations are shown as a wavy solid line, and the trend is shown as a straight dotted line.
Modern economics has more than a thousand types of cycles. The most common is the classification of economic cycles by duration, in which three types of cyclical fluctuations are usually distinguished:
Short-term cycles with a frequency of 3.5-4 years;
Medium-term cycles with a frequency of 8-10 years;
Long-term cycles with a frequency of 48-55 years.
Short term cycles also called the cycles of J. Kitchin - by the name of their author. They are now better known as stock cycles. Kitchin cycles consist of disruption and restoration of equilibrium in the consumer market. Each cycle ends with a new equilibrium with already changed proportions in the demand for consumer goods. Kitchin cycles are explained by the time interval between the allocation of investments and the introduction of new means of labor, as a result of which the balance is restored. Most modern economists who support the idea of the existence of short-term economic cycles tend to consider them as an integral part of the general cyclical system, which is based on medium-term economic cycles.
Medium term cycles- these are the cycles of R. Zhuglyar, which are given the most attention in the study of macroeconomic instability, since the policy of the government is mainly aimed at smoothing these cyclical fluctuations. These cycles have other names: "industrial cycle", "business cycle", "business cycle", "classical cycle". The first crisis (crisis of overproduction) as the beginning of the classical cycle occurred in England in 1825, and since 1857 such crises have become global. In the period before the Second World War, the duration of these cycles was 10-12 years, and now - 8-10 years. Most economists see the main cause of these cycles in the renewal of fixed capital. Most accurately, business cycles - fluctuations in investment spending, GDP, inflation and unemployment - are described by the model of cyclical fluctuations of the French economist R. Juglar.
Long term cycles- long waves Kondratiev, or large conjuncture cycles, were named after the outstanding Russian economist N.D. Kondratiev. He suggested that the most devastating crises occur when the long-term and medium-term business downturn peaks coincide. The crisis of 1873 and the "Great Depression" of 1929-1933 can serve as examples of such states of the economy.
Exploring the development of European countries over a period of 100-150 years, Kondratiev identified three large cycles:
1st cycle - from the beginning of the 90s. 18th century until the middle of the 19th century.
2nd cycle - from the middle of the XIX century. until 1890-1896
3rd cycle - from 1896 to 1940-1945
Moreover, in his cycles, Kondratiev singled out two phases- up and down. He showed that before the upward phase there is a revival in the field of technical inventions, after which, at the stage of industrial growth, their mass introduction into production. He showed the relationship of scientific and technical progress with the development of a large cycle. Kondratiev explained the main reason for the existence of large cycles by the different periods of functioning of various economic goods (consumer goods, tools, buildings), the production of which requires different time periods, especially in order to accumulate capital for their creation.
Thus, large cycles arise on the basis of the accumulation of capital to create new infrastructure. In this regard, the material basis of "long waves" is a change in technological structures.
Technological order- a system of methods prevailing in the country for solving a certain type of technological problems and devices that ensure the implementation of these methods.
The theory of long or large cycles is of particular importance, as it makes it possible to predict the development of the market system far ahead and, therefore, increase its adaptability, absorbing future shocks.
The nature of the cycle, the duration and specifics of its individual phases are greatly influenced by causes that are due to two groups of factors: external and internal. Accordingly, they distinguish between exogenous and endogenous theories of the business cycle.
Endogenous theories explain the economic cycle as a product of internal factors inherent in the economic system itself.
These internal economic factors include:
The physical life of the fixed capital (every 10-12 years in the 19th century and every 7-8 years in the 20th century, the fixed capital is renewed, since technical progress is constant, therefore, within the indicated periods, the fixed capital physically and morally becomes obsolete and must be replaced) ;
Activation or decline in consumer activity;
innovation;
The economic policy of the state, expressed in direct and indirect impact on production, demand and consumption.
Attempts to explain the economic cycle with the help of only exogenous or endogenous theories did not give success, since changes in the economic system of this magnitude cannot be caused only by external or only internal factors. Therefore, most scientists and economists explain the economic cycle by the synthesis of both, that is, external factors give impetus to the cycle, and internal ones lead to phase fluctuations. In general, all these reasons can be reduced to one main reason.
The main reason for economic cycles is the mismatch between aggregate demand and aggregate supply, between aggregate spending and aggregate output. Therefore, the cyclical nature of the development of the economy can be explained: either by a change in aggregate demand with a low aggregate supply (an increase in aggregate costs leads to an increase, their reduction leads to a recession); or a change in aggregate supply with a constant aggregate demand (a decrease in aggregate supply means a recession in the economy, its growth means a rise).
The business cycle is cyclical changes in the economic environment, periodic fluctuations in the level of business activity (levels of employment, production and inflation), represented by real GDP. Thus, under the economic cycle is meant the period of economic development between two identical states of the conjuncture
In macroeconomics, there is no unified theory of the economic cycle; researchers pay attention to different causes of cyclicity. But most economists propose to study this phenomenon through an analysis of external and internal factors that affect the nature of the cycle, its duration, and the specifics of the manifestation of individual phases.
In the structure of the cycle, the highest and lowest points of activity and the phases of decline and rise lying between them are distinguished. The total cycle duration is measured by the time between two adjacent activity troughs. Accordingly, the duration of the decline is the time between the highest and subsequent lowest points of activity, and the rise is the opposite.
The economic cycle is divided into four phases:
1. Recession In this stage, production declines, growth rates become negative, unemployment rises and aggregate demand falls. The moment of crisis in the economic cycle for most participants in economic activity is unexpected, so it is always destructive. At this stage, the market is overstocked with goods as demand shrinks, but production continues at the same pace, causing inventory to build up. During a crisis, securities prices fall and enterprises are massively closed - first of all, credit institutions are liquidated, since during a crisis they suffer acutely from mass loan defaults.
2. Depression. National income continues to decline, but the rate of decline is slowing down. The economy, as it were, is frozen in the state it reached during the recession. In depression, against the background of general stagnation, only the value of the loan interest is rapidly changing. It falls because the "surviving" capitalists have free cash as a result of low production costs. Wages are fixed at the lowest point.
3. Revitalization. The transition from a decline in production to its increase; gradual return of the economy to a state corresponding to equilibrium growth. The fact is that in a state of depression commodity stocks and prices stabilize. Low prices stimulate consumption, demand. And not just for commodities. The crisis showed the technological and technical failure of fixed capital. Its replacement begins - the renewal of capital, which means that the phase of revival and the gradual growth of the economy has begun. The revival phase is characterized, first of all, by the expansion of the production of means of production. Consequently, the revival impulse begins with enterprises producing equipment, elements of fixed capital. Then, slowly but surely, a picture emerges that is the reverse of the crisis: production expands following the growth in demand, unemployment decreases, and wages rise.
4. Expansion The national income is growing despite full employment. The demand for investment increases, unemployment falls below the natural level. The price level, the wage rate and the interest rate rise. The inevitable consequence of this development is the transition from growth to decline. The criterion for the transition of the economy from recovery to recovery is the achievement of the pre-crisis level of production.
Types of economic cycles:
short-term Kitchin cycles (characteristic period - 2-3 years). Kitchin himself explained the existence of short-term cycles by fluctuations in world gold reserves, but in our time such an explanation cannot be considered satisfactory. In modern economic theory, the mechanism for generating these cycles is usually associated with time delays (time lags) in the movement of information that affect the decision-making of commercial firms .;
medium-term Juglar cycles (characteristic period - 6-13 years) Within the framework of Juglar cycles, fluctuations are observed not only in the level of utilization of existing production capacities (and, accordingly, in the volume of commodity stocks), but also fluctuations in the volume of investments in fixed capital. As a result, in addition to the time delays characteristic of Kitchin cycles, there are also time delays between making investment decisions and the construction of the corresponding production facilities (and also between the construction and actual launch of the corresponding facilities). An additional delay is also formed between the decline in demand and the elimination of the corresponding production capacities.;
Kuznets rhythms (characteristic period - 15-20 years) Kuznets associated these waves with demographic processes, in particular, the influx of immigrants and building changes, so he called them "demographic" or "building" cycles. However, modern researchers consider the rhythms of the Smith as technological, infrastructural cycles, within their framework, a massive update of the main technologies takes place;
long waves of Kondratiev (characteristic period - 50-60 years) Kondratiev explained the existence of large cycles by different periods of functioning of different economic goods, the production of which also needs to spend different times. Especially - to accumulate capital for their creation. So big cycles arise on the basis of the accumulation of capital to create new infrastructure. This main cause is superimposed by others, secondary ones. The essence of fluctuations is that the infrastructure of the economy must be in balance with all its other parameters, which are peculiar to it at this particular level of development. Violation of this balance means the beginning of a cycle. The frequency of repetition is 45-50 years, as determined by Kondratiev based on the analysis of statistical material. The theory of long, or large, cycles is of particular importance, as it makes it possible to predict the development of the market system far ahead, in the future, and, therefore, increase its adaptability, absorbing future shocks.