What is a business cycle in economics?

Business cycles are a type of fluctuation found in the aggregate economic activity of a nation—a cycle that consists of expansions occurring at about the same time in many economic activities, followed by similarly general contractions. This sequence of changes is recurrent but not periodic. The business cycle is also called the economic cycle .

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 is a recovery phase?

The recovery phase is when the economy hits its trough, bottoms out, and begins the cycle anew. Policies enacted during the contraction phase begin to bear fruit. Businesses that retrenched during the contraction begin to ramp up again. Stock values tend to rise as investors see greater potential returns in stocks than bonds.