Introduction:

The economic progress of capitalist countries has been marketed by periodical and frequent fluctuations in the tempo of economic activity in investment in output in income and in employment. this economies are constantly experiencing such changes .the dynamic forces operating in the capitalist economy creates various kinds of business or economic fluctuation one such fluctuation is cyclical which is called as trade cycle. According to PA Samuelson the business cycle is a pulse common to most sector of economic life and to diverse countries. The causes and measures of trade cycle are the key answer.

Trade cycle is the cyclical fluctuations which are wave like changes in economic activity characteristic by recurring phase of expansion and contraction. These moment take the shape of waves from peak to through and from through to peak one complete period of such movement is called a cycle; trade cycle.

Causes of Trade cycle:

A trade cycle is a complex phenomenon which embraces the entire economic system it enlists of following internal and external causing business cycles.

• Internal causes:

The internal causes are refers to the mechanism with the economic system itself which give rise to self generating and perpetuating business cycle such internal factors are;

• Changes in money supply or bank credit: Hawtrey regard business cycles are a purely monitory phenomenon .professor haw trey firmly assets that the causes of cyclical fraction are to be found only in those factor that produces expansion and contraction in the flow of money supply.
• Over investment: According to professor Hayek, monitory over investment in the capital good sector supported by the over expansion of bank credit may eventually lead to depression in the economy  while many other economy have attributed over investment in capital good as a major cause of business cycles.
• Under consumption or over saving: According to economist like Malthus, marxs and Hobson the root cause of a trade cycle is over saving or under consumption. Which is due to the existing unequal distribution of wealth in the community? Hobson states that the induce exercise of the habit of saving would not enrich the community but would impoverish it because such large amount of saving give rise to greater value of capital formation which in turn  producers larger quantities of consumption of goods but in view of the increasing inequality of income and rising saving the amount of consumption taking place in the economy not be sufficient to lift all the goods brought to the market and  a decline section cannot lost long because of the limitation of the community power of consumption of any qualities of income.
• Business psychology: The business community generally over sensitive so there are waves of business optimism and pessimism. According to the psychological errors of optimism and pessimism give rise to a trend of business fluctuation in a pervasive manner. Business optimism and pessimism are interactive forces for once the business community realizes that it has made an error of optimism it then tries to correct it by committing errors of pessimism.
• Innovations:  J.A Schumpeter regards innovation as the originating causes of trade cycle that term innovation should not be confused with the inventions. Inventions are discoveries scientific novelties. Innovation is the application of such invention to actual production it is innovation that are subjected to cyclical fluctuation not inventions.

Schumpeter classified innovation into 5 categories as follow:

• Introduction of new types of goods
• Introduction of new methods of production
• Opening of new markets
• Discovery of new source of raw materials
• Changes in the organization of industry like the creation of a Monopoly trust or curtain breaking up of monopoly cartel etc.
• Changes in the marginal efficiency of capital: according to Keynes a business cycle operates due to the fluctuation in the rate of changes in the marginal efficiency of capital. In his own trade cycle is best regarded as being occasioned by a cyclical change in the marginal efficiency of capital though complicated and often aggregated by associated changes in the other significant short period variables of the economic system.  

External causes:

External factors are the forces operating outside economic system in causing the business cycle such external forces on sun spots and weather conditions, wars revolutions, rates of growth of population, discoveries of new land and resources scientific breakthrough and technology advancement. Above all, elections and politics in modern Times or also causing business cycle professor Samuelson called them the political business cycle today economic life vibrates by and large with the rhythm of politics.

Measures of Trade cycle:

A business firm can minimize the effect of business cycle through two categories of measures.

Preventive measures and relief measures:

Preventive measures: The preventive measures are undertaken during the prosperity period to avoid ill effects of sudden crisis of the bottom the preventive measures may be include.

• The management of plant with a view to avoiding increase in overhead cost or decrease in output
• Managing satisfactory level of labor supply and steady employment of labor.
• Managing purchase of materials etc within the limit of financial resources of the firm
• Conservation of capital assets of the firms                                                                
• Creation of reserve funds
• Regulation of inventories
• Avoiding over expansion, over investment and over sales
• Business credit planning with flexible credit standard.

Relief measures: Relief measures are to be undertaken to deal with a problem arising from recession and depression they are also meant for the recovery these may include

• Cost reduction
• Liquidation of inventories
• Qualitative improvement in production
• Sales promotion efforts
• Innovations launching upon new lines of production
• Development of plant
• Improvement of organizations
• Transforming surplus labor into other departments having short ages.

also read: explain the methods of repayment of public debt.