Business Cycle Defined
The business cycle is the upward and downward motion of the economy.
The business cycle consists of six phases:
Business Cycle Phases
After a period of time, the depression hits the bottom which is classified as the trough.
The trough can be signaled by unemployment remaining level and businesses starting to see production levels increasing.
With prices being low, this can spark an increase in demand which will increase employment and production simultaneously.
This stage of the business cycle is called the recovery stage.
The last and final stage of the business cycle is the expansion phase.
In this phase, companies tend to hire employees at a faster rate, production and sales increase.
Also in this phase, people tend to pay their debts on time and investing in companies and the market is increasing.
The business cycle shows how the real gross domestic product fluctuates over a period of time going through phases of output increases and decreases.