Definition: Schumpeter’s Theory of Innovation is in line with the other investment theories of the business cycle, which asserts that the change in investment accompanied by monetary expansion are the major factors behind the business fluctuations, but however, Schumpeter’s Theory posits that innovation in business is the major reason for increased investments and business … [Read more...] about Schumpeter’s Theory of Innovation
Monetary Over-Investment Theory
Definition: The Monetary Over-Investment Theory posits that imbalance between the actual and desired investments, i.e. actual investments exceeding the desired investments, explain the fluctuations in the economic activities. The monetary over-investment theory was proposed by Hayek, who stresses that in order to maintain economy’s equilibrium the pattern of investments … [Read more...] about Monetary Over-Investment Theory
Pure Monetary Theory
Definition: The Pure Monetary Theory was proposed by Hawtrey, according to him the changes in the money flows in the economy cause the fluctuations in the level of economic activities. Thus, this theory posits that the business cycle is caused due to the fluctuations in the monetary and credit markets. The fluctuations in the supply of money and the bank credit are the main … [Read more...] about Pure Monetary Theory
Theories of Business Cycle
Definition: The Business Cycle refers to the periodic boom and slump in the economic activities reflected by the fluctuations in aggregate economic magnitudes which includes total production, employment, investment, bank credits, wages, prices, etc. Simply, the business cycle refers to the ups and downs explained in terms of expansion and depression that an economy experiences … [Read more...] about Theories of Business Cycle
Phases of Business Cycle
Definition: The Business Cycle refers to the ups and downs in the economic activities that the economy experiences over a period of time. Generally, the business cycle is the upward and downward movement in the level of GDP reflected by the fluctuations in the aggregate economic magnitudes Viz. Total production, employment, investment, wages, etc. Phases of Business … [Read more...] about Phases of Business Cycle
Business Cycle
Definition: The Business Cycle, also called as Economic Cycle or Boom-Bust Cycle refers to the periodic booms and slumps in the economic activities reflected by the fluctuations in the aggregate economic magnitudes, including employment, investment, total production, wages, bank credits, etc. In other words, the business cycle refers to the ups and downs defined in terms of … [Read more...] about Business Cycle
Social Cost
Definition: The Social Cost is the cost related to the working of the firm but is not explicitly borne by the firm instead it is the cost to the society due to the production of a commodity. The social cost is used in the social cost-benefit analysis of the overall impact of the operations of the business on the society as a whole and do not normally figure in the business … [Read more...] about Social Cost
Private Cost
Definition: The Private Cost is the cost related to the working of the firm and is used in the cost-benefit analysis of the business decisions. These costs are borne by the firm itself. The private cost is the actual cost incurred in performing the day to day operations of the business, such as the cost involved in the production and consumption of the product. For a firm, … [Read more...] about Private Cost
Replacement Cost
Definition: The Replacement Cost is the cash outlay that firm has to pay in order to replace an old asset at the current market price. Simply, the amount paid to replace the existing property with the new one having the similar utility, without considering the depreciation constitutes the replacement costs. The replacement cost is used while taking the business decisions of … [Read more...] about Replacement Cost
Historical Cost
Definition: The assets and liabilities recorded in the balance sheet with its original acquisition cost, the i.e. amount spent at the time of its acquisition are called as the Historical Cost. In other words, the historical cost is an accounting method in which the assets of the firm are recorded in the books of accounts at the same value at which it was first purchased. The … [Read more...] about Historical Cost