BUSINESS CYCLE
The business cycle is a term used by economists to describe the increase and
decrease in economic activity over time. The economy is all activities that
produce, trade, and consume goods and services within the U.S.—such as
businesses, employees, and consumers. Thus, the measured amount of
productivity is what the business cycle refers to.
Alternate definition: The business cycle is the downward and upward
fluctuations of the productivity level of the economy, along with its natural
growth rate over a long period.
Alternate names: Economic cycle, trade cycle
When businesses are increasing production, they need more employees. As a
result, more people are hired, there is more money to spend, and businesses
make more profits and can focus on growth. The rate at which production and
consumption change positively is called "economic expansion." It continues until
circumstances occur that cause production to slow.
If business production slows, not as many employees are needed. As a result,
consumers have less spending money, and businesses reduce spending on
growth. The rate at which production and consumption as a whole change
negatively is called "economic contraction."
FOUR STAGES OF BUSINESS CYCLE
1. Expansion: When a nation’S GDP shows an upward move or
recovers with time, this period of growth is remarked as
economic expansion. During this phase, economic indicators
like consumer spending, income, demand, supply,
employment, output, and business returns shoot up.
2. Peak: During the expansion phase, the GDP spikes to its
highest level; this is considered the economic factors like
income, consumer spending, and employment level remain
constant.
3. Contraction: Next comes the phase of economic slowdown;
it occurs when the stagnant peak GDP starts tumbling down
towards the trough. With this, the nation’s production,
employment level, demand, supply, income level, and other
economic parameters plummet.
The business cycle is a term used by economists to describe the increase and
decrease in economic activity over time. The economy is all activities that
produce, trade, and consume goods and services within the U.S.—such as
businesses, employees, and consumers. Thus, the measured amount of
productivity is what the business cycle refers to.
Alternate definition: The business cycle is the downward and upward
fluctuations of the productivity level of the economy, along with its natural
growth rate over a long period.
Alternate names: Economic cycle, trade cycle
When businesses are increasing production, they need more employees. As a
result, more people are hired, there is more money to spend, and businesses
make more profits and can focus on growth. The rate at which production and
consumption change positively is called "economic expansion." It continues until
circumstances occur that cause production to slow.
If business production slows, not as many employees are needed. As a result,
consumers have less spending money, and businesses reduce spending on
growth. The rate at which production and consumption as a whole change
negatively is called "economic contraction."
FOUR STAGES OF BUSINESS CYCLE
1. Expansion: When a nation’S GDP shows an upward move or
recovers with time, this period of growth is remarked as
economic expansion. During this phase, economic indicators
like consumer spending, income, demand, supply,
employment, output, and business returns shoot up.
2. Peak: During the expansion phase, the GDP spikes to its
highest level; this is considered the economic factors like
income, consumer spending, and employment level remain
constant.
3. Contraction: Next comes the phase of economic slowdown;
it occurs when the stagnant peak GDP starts tumbling down
towards the trough. With this, the nation’s production,
employment level, demand, supply, income level, and other
economic parameters plummet.
