Economic Indicators and Measurements


What Is the Business Cycle?



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What Is the Business Cycle?

  • Stage 2: Peak
    • Peak is point at which real GDP is highest
    • As prices rise and resources tighten, businesses become less profitable
      • businesses cut back production and real GDP drops

What Is the Business Cycle?

  • Stage 3: Contraction
    • During contraction, producers cut back and unemployment increases
      • resources become less scarce, so prices tend to stabilize or fall
    • Recession—contraction lasting two or more quarters
    • Depression—long period of high unemployment and limited business activity
    • Stagflation—stagnation in business activity with inflation of prices

What Is the Business Cycle?

  • Stage 4: Trough
    • Trough is point at which real GDP and employment stop declining
    • A business cycle is complete when it has gone through all four phases

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