business cycle

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Recommended: Effects of a business cycle

The business cycle is defined as the periodic fluctuations in economic activity which is measured by the changes in real GDP. The amount of economic activity depends on factors such as how much is invested by entrepreneurs towards their business, the quality of technology used by the entrepreneur, the policies which the government incorporate etc. Gross Domestic Product measures this economic activity. It is the total value of all of the goods and services produced by all of the businesses in a country. When GDP increases over time, this signifies greater economic activity, this is called economic growth. There are four stages of the business cycle- boom, recession, slump, recovery.

A boom is a period of relatively rapid economic growth. During a boom, the level of economic activity increases with the increase in factors such as consumer expenditure, investment, export earnings etc. Unemployment will be the lowest compared to the other stages of this business cycle as growth in the economy will create new job opportunities. Also, the consumer and business confidence will b...

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