Economic Business Cycles
Economic Business Cycles
A business cycle by definition is the movement of economic activity that occurs around the growth trend. Many events in society cause these fluctuations to occur. The business cycle is divided up into four stages. They include the peak, the downturn, the trough and the upturn. The peak represents the output being high or the Gross Domestic Product (GDP) being high. The economy is booming at this time. As the expansion peaks there is the downturn. This is when the economy begins to fall. If the real GDP output declines for two consecutive quarters then we call it a recession. A big recession is what we call a depression. At the lowest point at the end of the recession or depression is the trough. As expansion begins again we experience the upturn in economic output. An expansion is the opposite of a recession. The upturn must last two consecutive quarters to be called an expansion.
Before the Great Depression of the 1930?s the general economic thought was that these phases of the business cycle were normal. The must just be accepted and not messed with. During the Great Depression production of goods and services fell by 30 percent.
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