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What is a business cycle in economics?

The economic or business cycle refers to the cyclical pattern experienced by the economy. The economy remains in an expansion phase until it reaches its peak, reversing to the downside and entering a contraction before a trough, and begins to expand once again.

What is economic cycle & why is it important?

An economic cycle, also known as a business cycle, refers to economic fluctuations between periods of expansion and contraction. Factors such as gross domestic product (GDP) , interest rates, total employment, and consumer spending can help determine the current economic cycle stage.

What is a business cycle model?

The business cycle model shows how a nation’s real GDP fluctuates over time, going through phases as aggregate output increases and decreases. Over the long-run, the business cycle shows a steady increase in potential output in a growing economy. The typical business cycle has four phases, which progress as follows:

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