Types of business cycles

Even though we have identified four phases of a business
cycle, it must be emphasized that business cycles seldom follow a regular
pattern. Cycles differ in the length of each phase and the speed with which each
phase lead to the other. Depression may exist for a relatively short or long
time while recovery may not be followed by any significant period of prosperity
and may indeed lead to another phase of recession. However, it is clear that
all business cycles exhibit the above pattern. From a depression, the level of
economic activities reaches a lower turning point, goes through a period of
recovery until it reaches an upper turning point and the economy falls into a
recession. Business cycles can be conveniently classified using the duration it
takes for the cycle to be completed. In this wise, business cycles can be minor
or major. A minor cycle has duration of 2-5 years while major cycles have
durations of between 6-13 years.

Characteristics
of various phases of a standard cycle

Characteristics	Depression	Recovery	Prosperity	Recession
1 Employment	Low	Slow rise	High	Sudden fall
2 Industrial output	Low	Slow increase	High, bottlenecks appear	Decrease
3 Wages	Low	Rising, but lag behind prices	High, but lag behind prices	Falling, but lag behind prices
4 Prices	Low	Slow rise	High, very high in the last stage	Rapid fall
5 Bank loans	Low	Expanding	High	Cuts sharply
6 Bank reserves	Low	Slow fall	Low	Sudden rise
7 Bank clearing	Small	Slow rise	Large	Sudden fall
8 Discount rates	Low	Fairly low	Rising	High
9 Cost of production	Low	Rise slowly	High, very high in the last stages	Falling
10 Profits	Positive towards the end	Rising	High but falling	Disappear
11 Business failure	Many	Few	Few	Sudden rise
12 speculation	Very little	Rise slowly	Widespread	Little
13 Business inventories	Low	Rise slowly	High, very high in the late stage	Falling
14 Building construction	Almost nil except public works	Slow rise	Much, very high in last stage	Sudden stop
15 feeling	Hope	Hope	Optimism	hesitation