Wednesday 4 May 2016

Why is there a business cycle?

We often talk about the business cycle, as we believe that our economy is expanding in an upward trend but has upturn and downturn. The cycle of the upturn and downturn is called the business cycle. However, as we know that each cycle is different from the other, as the factors of the economy are always changing. I think that this is because we always try to manipulate our economy. We are not perfect that we cannot fully understand all effects of the policies and regulations designed by ourselves. The policies we design usually have immediate positive effects that can restore the market confidence and push up our economic growth. However, the negative effects will appear later after some time and cause the economic downturn. Once we realize the weakness in our economy, we start to add more regulations and policies which are also not perfect. Therefore, the business cycle is a man-made phenomenon rather than a natural phenomenon.

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