Business Cycle Theories explain fluctuation causes. Keynesian Theory: Demand-driven cycles; changes in investment and consumption spending cause output fluctuations; multiplier amplifies initial changes. Multiplier principle: Initial demand increase generates further rounds of spending, magnifying total output increase. Accelerator principle: Investment depends on output growth rate; demand changes accelerate investment changes. Monetary Theory: Money supply changes cause cycles; inflation or deflation follows monetary changes, affecting real output in short run. Expectations-driven: Future expectations about profit/income cause current investment changes, creating cycles. Real Business Cycle Theory: Productivity shocks (technology changes) cause cycles; individuals respond rationally to new information. Supply-side: Adverse supply shocks (oil prices, resource constraints) reduce output, creating downturns. Psychological: Confidence and animal spirits cause cycles; optimism drives expansion, pessimism drives contraction. Institutional: Rigidities (wage contracts, price stickiness) slow adjustment, prolonging cycles. ICAI focus: Different theoretical perspectives, policy implications of each. Exam tip: Keynesian (demand-focused) vs. monetary (money-focused) are most frequently tested theories.