Business

Business cycle

Recurring change in GDP marked by expansions and recessions

Expansion (business cycle)

When economy is doing well

GDP, output, stock market, business investment increase

Expansion of credit (belief that future income will pay for things)

Unemployment decreases

Inflation increases (prices goes up), happens because of shortage

Peak (business cycle)

Economy at maximum output, unsustainable path

False peaks common- don’t know until after

Recession (business cycle)

Opposite of expansion

Credit tightens, people struggle to pay debt.

Trough (business cycle)

Economy at lowest output

Economy needs intervention

Government and central banks gets involved

False troughs are common

Trendline (business cycle)

Steady economic growth path despite ups and downs