BUSINESS CYCLES AND PROFITS Introduction This r

Cyclical movements in the level of economic activity are recognized in economic theory (Ekelund and Hebert 413425). Significant effort is put into the measurement of business cycles, and into the development of indicators of change for such cyclical activity (Beckman and Tapscott 2428). Such measurement and indicator development provide data as to what and when, while failing to answer the underlying question of why. Although a great body of theoretical literature has evolved with respect to cyclical economic movement, no single theory or combination of theories has satisfactorily explained all such phenomena.The term business cycle is the name given to relatively shortterm fluctuations in the general level of economic activity, as measured by macroeconomic variables, such as changes in real gross national product or real gross domestic product (Gwartney, Stroup, and Studenmund 138). As early as 1819, Jean Sismondi, a Swiss economist, recognized and systematically investigated such shortrun economic fluctuations.

The first widely accepted working definition of the business cycle was formulated at the National Bureau of Economic Research (NBER) by Wesl

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oint of economic activity attained in the next boom phase, which means that the measurement begins with the contraction phase and ends with the boom phase of a business cycle. In troughtotrough measurements, the duration of the business cycle is measured from the low point of economic activity reached in one recessionary phase (the end of the phase) to the low point of economic activity reached in the next recessionary phase, which means that measurement begins with the expansionary phase and ends with the recessionary phase of a business cycle. Profits and Business Cycles The general time frame for this examination is the 40year 19541993 period. During this period, seven complete business cycles occurred in the economy of the United States. The expansion phase of the first complete business cycle subsequent to the end of the Korean War began in latesummer 1954 and lasted for six months (Heilbronner and Thurow 327). This business cycle was characterized by a 24 month boom phase, which was attributed to a capital goods boom in the American economy. The ensuing contraction lasted for almost a year, and was followed by a relatively sharp recessionary phase that lasted about six months. The next business cycle began in m
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Approximate Word count = 1863
Approximate Pages = 7 (250 words per page)

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