8.4. Business Cycle

Business cycles

Consists of short-term fluctuations

Expansion

Occurs when there's a positive growth in real GDP

Peak

Represent the cycle's maximum real GDP, and marks the end of expansion. Economy is likely to be experiencing inflations

Contraction

The economy begins to experience falling real GDP or negative growth

Recession

If contraction last six months or more→falling real GDP and growing unemployment resources

Through

End of contraction → new period of expansion also known as recovery

Potential growth

Output represented by the long-term growth trend