Economic theory considers the result of recession and business cycles. This has 2 different kinds of factors which are linked with it. A business cycle is a recurrent movement in the economy which creates an increase in the number of organizations for a short time. When a recession happens, a business cycle starts to form because businesses make decisions to cut back on spending. Additionally, most organizations lay off workers during a recession so the number of companies increases.Business cycle theory explains how this occurs. When an enterprise would be in decline, an issue arises that will require money. For a company, that money comes from clients and customers. When the recession is over, the business returns to ordinary spending patterns and begins filling the void left by the decline. So long as the customers are actually out there buying, there'll be a market for products.Since you will find two elements associated with business cycles, business cycle theory considers the role of consumer spending as a key element. But there are many reasons why individuals purchase products. They might need new appliances, purchase clothes for the holidays, eat out, or even drive a car. When a consumer uses up money in one area, they have to find cash to pay off the debt in another area. If the consumer is tight on money, they will spend money at the expense of paying in some other places. This causes companies to reduce their spending and develop the feeling of a down economy.