Basic Concepts in Economics — Economics STD 11 Commerce / Arts — Question

The Trade cycle is also called the ‘business cycle’. It takes place due to fluctuations in business.
There are ups and downs in overall economic activities. These fluctuations arise due to inflation and depression.
It can be explained with the help of the following diagram.


Inflation means a continuous rise in the general price. Depression is a continuous fall in overall prices and lowering down economic activities in general.
In the given diagram, the ‘X’-axis indicates the time period and the ‘Y’-axis shows the level of economic activity. Line ab shows a steady growth path.
Various phases of the business cycle or trade cycle like Prosperity, Recession, Depression, Recovery, and Inflation indicate fluctuations in economic activities.
When unemployment is created due to the trade cycle (cyclical fluctuation), it is called cyclical unemployment. It is temporary in nature.