Business cycles are identified as having four distinct phases: peak, trough, contraction, and expansion. Business cycle fluctuations occur around a long-term growth trend and are usually measured by considering the growth rate of real gross domestic product.
What are the main characteristics of a business cycle?
Characteristics of Business Cycle
- Business cycle occurs Periodically. The Business cycles occur periodically in a regular fashion.
- It is all embracing.
- Business Cycle is wave-like.
- Process of Business Cycle is cumulative and self-reinforcing.
- The cycles will be similar but not identical.
What are the phases of a business cycle?
So there are good phases of business cycles with economic growth and expansion of the economy, a rise in GDP etc. And there are slowdowns and negative phases of business cycles with rising unemployment, high inflation, low GDP, negative growth etc. These phases are cyclic in nature and occur periodically in every economy.
When does the economy hit the bottom of the business cycle?
That’s the month when the economy transitions from the contraction phase to the expansion phase. It’s when the economy hits bottom. The business cycle’s four phases can be so severe that they’re also called the boom and bust cycle. Who Measures the Business Cycle?
What happens after the trough of the business cycle?
There is extensive depletion of national income and expenditure. After this stage, the economy comes to the stage of recovery. In this phase, there is a turnaround from the trough and the economy starts recovering from the negative growth rate. Demand starts to pick up due to the lowest prices and, consequently, supply starts reacting, too.
When did the expansion phase of the business cycle start?
The expansion phase started in the third quarter of 2009 when GDP rose by 1.5%. That was thanks to the stimulus spending from the American Recovery and Reinvestment Act. The unemployment rate continued to worsen, reaching 10% in October. Four years into the expansion phase, the unemployment rate was still above 7%.
