Changes in aggregate demand bring about changes in the level of output, employment, income, and price. These changes are generally cyclical in nature. These changes, more generally, follow a cycle of four different stages namely boom, recession, depression and recovery. The cyclical nature of economic activity is known as trade cycle or business cycle. Boom is a stage of economic activity characterized by rising prices, rising employment, rising purchasing power.During the boom period economy may get overheated, if it so happens, the monetary authorities, the financial institutions begin to play cautiously. There may be cuts in investment, resulting in cuts in employment; decline in purchasing power, economy may be caught in a web of pessimism, leads to recession. During this stage, if effective corrective measures are not undertaken, the economy may find itself caught in the whirlpool of depression. It is a stage where investment, employment, output touches the bottom. As the economy moves out of depression, it enters the phase of recovery. Keynesian diagnosis of trade cycles is given in terms of changes in aggregate demand. These are $$excess demand$$ and $$deficient demand $$that cause trade cycle. $1$ During the time of $$excess demand$,$ Govt. should $..................$ the public expenditure. a$)$ Reduce b$)$ increase c$)$ unchanged d$)$ none of these.