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Business cycle

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Business Cycle

The business cycle is the natural fluctuation of the economy between periods of expansion and contraction. It is characterized by alternating periods of economic growth and decline, with each phase lasting for several months or years. During an expansion, businesses and consumers are more likely to spend money, leading to increased economic activity. During a contraction, businesses and consumers are more likely to save money, leading to decreased economic activity. The business cycle is an important concept for businesses, investors, and economists, as it helps to explain the ups and downs of the economy.

History of the Business Cycle

The concept of the business cycle was first developed by British economist William Stanley Jevons in the late 19th century. Jevons observed that economic activity seemed to follow a regular pattern of expansion and contraction. He proposed that this pattern was caused by the interaction of supply and demand in the economy. Since then, economists have studied the business cycle in more detail, and have developed models to explain its causes and effects.

Comparison of Expansion and Contraction

Expansion Contraction
Increased economic activity Decreased economic activity
Increased consumer spending Decreased consumer spending
Increased business investment Decreased business investment
Increased employment Decreased employment

Summary

The business cycle is the natural fluctuation of the economy between periods of expansion and contraction. It is characterized by alternating periods of economic growth and decline, with each phase lasting for several months or years. For more information about the business cycle, visit the websites of the Federal Reserve Bank of St. Louis, the U.S. Bureau of Economic Analysis, and the International Monetary Fund.

See Also

  • Economic Growth
  • Recession
  • Inflation
  • Deflation
  • Monetary Policy
  • Fiscal Policy
  • Gross Domestic Product
  • Unemployment Rate
  • Interest Rates
  • Consumer Price Index

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