The business cycle is the cycle of short-term ups and downs in the economy. The Alternating periods, of economic growth and contraction. The main measure of how an economy is doing is aggregate output
Aggregate output is the total quantity of goods and services produced in an economy in a given period.
Explanation of Business Cycle
A recession, contraction, or slump is the period in the business cycle from a peak down to a trough, during which output and employment fall.
A depression is a severe reduction in an economy's total production accompanied by high unemployment lasting several years
An expansion, or boom, is the period in the business cycle from a trough up to a peak, during which output and employment rise.
Ups and downs of the Business Cycle
• Peak: at the peak of the business cycle, Real GDP is at a temporary high.
• Contraction: A decline in the real GDP. If it falls for two consecutive quarters, it is said the economy to be in a recession.
• Trough: The Low Point of the GDP, just before it begins to turn up.
• Recovery: When the GDP is rising from the trough.
• Expansion: when the real GDP expands beyond the recovery.
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