Different Economic Cycles

The special story in the recent issue gave me some good insights regarding quality stocks. You also mentioned economic cycles. What are the different economic cycles? - Aditi P 

Editor Responds: We appreciate your kind words of encouragement. To answer your query, economic cycles refer to the regular pattern of expansion and contraction in economic activity that occurs over time. There are several different types of economic cycles, each with its own characteristics and causes. The most common cycle is the business cycle, which includes four phases: expansion, peak, contraction and trough. During the expansion phase, the economy grows, employment and wages rise and consumer spending increases. At the peak, the economy reaches its highest point, and growth slows down. During the contraction phase, economic activity decreases, leading to lower employment and reduction in wages and consumer spending. The trough marks the bottom of the cycle where the economy begins to recover. Other types of cycles include the inventory cycle, which reflects changes in inventory levels and the financial cycle which involves fluctuations in credit and asset prices. There is also the Kondratiev wave, which is a long-term cycle spanning several decades. Understanding economic cycles can help policymakers and investors take informed decisions and better prepare for future changes in the economy. Keep writing to us with your queries.