What is economic cycle?

An economic cycle is the circular movement of an economy as it moves from expansion to contraction and back again. Economic expansion is characterized by growth and contraction, including recession, a decline in economic activity that can last several months. Four stages characterize the economic cycle or business cycle.

What are the 4 stages of an economic cycle?

An economic cycle, or business cycle, has four stages: expansion, peak, contraction, and trough. The average economic cycle in the U.S. has lasted roughly five and a half years since 1950, although these cycles can vary in length. Factors to indicate the stages include gross domestic product, consumer spending, interest rates, and inflation.

What is a business cycle?

What we’re talking about is the economic cycle, aka “business cycle.” Economic cycles are the recurrent boom-and-bust phases that markets and economies typically exhibit. Think of it like a wave: Hitting bottom and recovering, where the wave begins anew.

How does a country's economy change during a business cycle?

The gross domestic product (GDP) of a country can increase or decrease depending on the phase of its economy, and analysts may use this information to determine when a country's economy enters a new phase of the business cycle. Leaders of a country can influence the economic cycle phases by enacting new policies or modifying existing policies.