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What is the business cycle?

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Quick answer

The business cycle is the natural rise and fall of economic activity over time. Economies move through phases — expansion, peak, contraction (recession), and recovery — repeating in a cycle that affects jobs, spending, and growth. It's the repeating up-and-down of economic activity.

Key things to understand

  1. It's the repeating up-and-down of economic activity.
  2. Phases: expansion, peak, contraction, and trough.
  3. It shapes employment, spending, and business profits.
  4. Governments and central banks try to smooth its swings.

People also ask

What is the business cycle?
The recurring pattern of economic expansion and contraction that economies move through over time.
What are the phases of the business cycle?
Expansion (growth), peak, contraction (recession), and trough, before recovery begins again.
Why does the business cycle matter?
It affects jobs, wages, investment, and how governments and central banks set policy.