Generally a business cycle is defined as a cycle consisting of a period of declining aggregate economic activity that is followed by a period of rising economic activity. The lowest point of the contraction is called the ‘depression’ or ‘trough’ and the highest point of the expansion is called the ‘boom’ or ‘peak’. According to Abel/ Bernanke (2007) “A complete theory of business cycle must have two components. The first describes the types of shocks or disturbances that are believed to affect the economy the most. The second component is a model that describes how key macroeconomic variables, such as output, employment, and prices respond to economic shocks”.
The most comprehensive definition of the business cycle was first formulated by Mitchell in 1927. Later Burns and Mitchell (1946:3) published it with a slight modification. The theory was now read as follows:
“Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; this sequence of change is recurrent but not periodic; in duration business cycles vary from more than one year to ten or twelve years; they are not divisible into shorter cycles of similar character with amplitudes approximating their own.”
The best example of a business cycle as stated by Abel/ Bernanke (2007) is the ‘Great Depression’ which is considered to be the worst economic contraction of the history. According to them, “after a prosperous decade in the 1920s, aggregate economic activity reached a peak in August 1929, two months before the stock market crash in October 1929. Between the 1929 peak and the 1933 trough, real GDP dropped by nearly 30%” (p. 291).
The ancient economic policy of the Hebrew presented such mechanisms through which the real estate fluctuations could be avoided efficiently. Three mechanisms that were of course inter related, helped in minimizing the risk of economic gyrations.
I. Leviticus 25:10: “And you shall consecrate the fiftieth year, and proclaim liberty throughout all the land to all its inhabitants. It shall be a Jubilee for you; and each of you shall return to his possession, and each of you shall return to his family.’’
II. Leviticus 25: 16 makes this principle lucid: “According to the multitude of years you shall increase its (land) price, and according to the fewer number of years you shall diminish its price; for he sells to you according to the number of years of the crops.”
III. “The land shall not be sold permanently for the land is Mine; ’’ (Leviticus 25:23).
Abel. Bernanke. (2007). Macroeconomics. Addison – Wesley J C Venter (n.d.) Reference turning points in the South African business cycle: Recent developments. Retrieved from. www.esaf.org/internet/Publication.nsf/LADV//ART092005.pdf
Brett Chulu (2012) Sustainable economy. Lessons from the Jubilee economic cycle. Retrieved from. http://www.theindependent.co.zw/2012/07/06/sustainable-economy-lessons-from-the-jubilee economic-cycle/