Lefiti, Joseph Period 1 11-15-11

Phases of a Business Cycle

A business cycle is alternating increases and decreases in the level of business activity of varying amplitude and length. The five stages of the business cycle are growth expansion, peak, contraction, and trough. Business cycles are usually measured by considering the growth rate of real gross domestic product. An expansion is economic growth as measure by the rise in gross domestic product (GDP). In the expansion phase, the economy as a whole enjoys plenty of jobs. Peak is when gross domestic product (GDP) stops to raise the economy has reach its peak, it is the height of an economic expansion. When business cycle reaches peak, the economy goes through contraction. Contraction is a decline in the economy, decline happens when gross domestic product (GDP) is falling. Trough (Trawf) is when the economy has reached the bottom also known as the lowest point in the economic contraction, this occurs when the gross domestic product (GDP) stops falling. These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession). Despite being termed cycles, these fluctuations in economic activity do not follow a mechanical or predictable periodic pattern. The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real gross domestic product (GDP) and other macroeconomic variables.