Macroeconomics & Investing · Entry 19 of 71

What Is the Business Cycle?

The economic pendulum of expansion and contraction

Core Definition

The Business Cycle refers to the fluctuations in economic activity that an economy experiences over time, characterized by alternating periods of growth and decline.

Key Phases

• Expansion: Rising employment, corporate investment, and economic activity.
• Peak: The height of the cycle, where growth begins to slow down and prices overheat.
• Contraction (Recession): Falling demand, rising unemployment, and declining GDP.
• Trough: The bottom of the cycle, from which the economy begins to recover.