What is recession, depression ,recovery and boom in market cycle or business cycle?Elaborate with graphical presentation.

Dear student,

we know that ideal situation for an economy is one in when AD = AS corresponding to the level of full utilisation of all the available resources. However, In real life, AD fluctuates which brings changes in the levels of output,employment,income and price.
These changes are cyclical in nature i.e. these changes follow a cycle of 4 different stages,namely Boom,Recession,Depression and Recovery.


Boom is the stage of increasing economic activities and there exist inflationary tendencies in this stage. 
After reaching its highest level,there comes some slackness in the economic activities and it is the Recession stage.
If above stage is not controlled, then it tends to turn into the stage of Depression. In this stage, economic activities sink very low. Depression is also known as 'Gloom' or 'Slump' of an economy.
After touching its minimum point,there is a process of Recovery in the economy. This recovery brings the economy back to the stage of Boom and thus cycle is complete.

Hope it helps.


  • 1
What are you looking for?