What is a business cycle?

A business cycle is a cycle of fluctuations in the Gross Domestic Product (GDP) around its long-term natural growth rate. It explains the expansion and contraction in economic activity that an economy experiences over time. A business cycle is completed when it goes through a single boom and a single contraction in sequence.

When is a business cycle completed?

A business cycle is completed when it goes through a single boom and a single contraction in sequence. The time period to complete this sequence is called the length of the business cycle. A boom is characterized by a period of rapid economic growth, whereas a period of relatively stagnated economic growth is a recession.

What are the 4 phases of a business cycle?

In general, the business cycle consists of four distinct phases: expansion, peak, contraction, and trough. What Does a Business Cycle Describe? A business cycle describes the fluctuations in an economy over a period of time, generally the period from the start of one recession to the start of the next.