in general, during the business cycle, when economic activity is peaking: course hero

What Is a Business Cycle?

What was the cyclical experience of the pre-WWII period?

What are the three P's and three D's of recession?

How long did the recession last in 1854?

How is the severity of a recession measured?

What is recession in economics?

How does a business cycle recovery work?

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Business Cycle Definition: 4 Phases of the Business Cycle

Community and Government Business Cycle Definition: 4 Phases of the Business Cycle. Written by MasterClass. Last updated: Aug 30, 2022 • 4 min read

Business Cycle: Definition and Stages | Indeed.com

Updated May 9, 2022 | Published November 12, 2020. Updated May 9, 2022. Published November 12, 2020

What Is a Business Cycle?

"Business cycles are a type of fluctuation found in the aggregate economic activity of nations…a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions…this sequence of changes is recurrent but not periodic." That description, from the 1946 magnum opus by Arthur F. Burns and Wesley C. Mitchell, Measuring Business Cycles, remains definitive today. 1 

What was the cyclical experience of the pre-WWII period?

The Varieties of Cyclical Experience. The pre-WWII experience of most market-oriented economies included deep recessions and strong recoveries. However, the post-WWII recoveries from the devastation wreaked on many major economies by the war resulted in strong trend growth spanning decades.

What are the three P's and three D's of recession?

These three P's correspond to the three D's of recession. An expansion begins at the trough (or bottom) of a business cycle and continues until the next peak, while a recession starts at that peak and continues until the following trough. The National Bureau of Economic Research (NBER) determines the business cycle chronology—the start ...

How long did the recession last in 1854?

In 1854–1899, they were almost equal in length, with recessions lasting 24 months and expansions lasting 27 months, on average. The average recession duration then fell to 18 months in the 1900–1945 period and to 11 months in the post-World War II period.

How is the severity of a recession measured?

A recession's depth is determined by the magnitude of the peak-to-trough decline in the broad measures of output, employment, income, and sales. Its diffusion is measured by the extent of its spread across economic activities , industries, and geographical regions. Its duration is determined by the time interval between the peak and the trough.

What is recession in economics?

A recession is actually a specific sort of vicious cycle, with cascading declines in output, employment, income, and sales that feed back into a further drop in output, spreading rapidly from industry to industry and region to region.

How does a business cycle recovery work?

On the flip side, a business cycle recovery begins when that recessionary vicious cycle reverses and becomes a virtuous cycle, with rising output triggering job gains, rising incomes, and increasing sales that feed back into a further rise in output. The recovery can persist and result in a sustained economic expansion only if it becomes self-feeding, which is ensured by this domino effect driving the diffusion of the revival across the economy.

What is cyclical unemployment?

Cyclical Unemployment Cyclical unemployment is a type of unemployment where labor forces are reduced as a result of business cycles or fluctuations in the economy, Inelastic Demand. Inelastic Demand Inelastic demand is when the buyer’s demand does not change as much as the price changes.

What is market economy?

Market Economy Market economy is defined as a system where the production of goods and services are set according to the changing desires and abilities of. that an economy experiences over time. A business cycle is completed when it goes through a single boom and a single contraction in sequence. The time period to complete this sequence is called ...

What happens to the economy during a depression?

In the depression stage, the economy’s growth rate becomes negative. There is further decline until the prices of factors, as well as the demand and supply of goods and services, contract to reach their lowest point. The economy eventually reaches the trough. It is the negative saturation point for an economy.

What is the first stage of a business cycle?

The first stage in the business cycle is expansion. In this stage, there is an increase in positive economic indicators such as employment, income, output, wages, profits, demand, and supply of goods and services. Debtors are generally paying their debts on time, the velocity of the money supply is high, and investment is high.

What are the extreme points of a business cycle?

This completes one full business cycle of boom and contraction. The extreme points are the peak and the trough.

What happens after the trough?

After the trough, the economy moves to the stage of recovery. In this phase, there is a turnaround in the economy, and it begins to recover from the negative growth rate. Demand starts to pick up due to low prices and, consequently, supply begins to increase.

What is the stage of the economy that follows the peak phase?

Recession. The recession is the stage that follows the peak phase. The demand for goods and services starts declining rapidly and steadily in this phase. Producers do not notice the decrease in demand instantly and go on producing, which creates a situation of excess supply in the market. Prices tend to fall.

What is a cycle in business?

A cycle is simply a series of events that occurs in some repetitive pattern. When thinking about the business cycle, picture a series of waves. A horizontal line represents the baseline, or the water level, and as waves occur, the water level peaks higher than the baseline, and each peak has a bottom, or a trough, on each side of it. When the wave grows from the trough to the peak, it is growing, and when it falls from the peak to the trough, it is contracting. This is the pattern the business cycle follows.

How often does the economy go through a peak to peak cycle?

No economy follows a perfectly timed cycle, although the US economy typically experiences a peak-to-peak cycle every four to seven years. That, of course, is an estimate, as government intervention in the form of fiscal and monetary policy can significantly influence the length and strength of the cycle. The image below shows the GDP growth for the U.S. economy during the 20th century. As you can see, a four- to six-year cycle is normal.

What does it mean to enroll in a course?

Enrolling in a course lets you earn progress by passing quizzes and exams.

Why do companies report flat revenues?

When companies start reporting flat revenues - especially companies in sectors like energy, materials, and financials - it could indicate that the overall economy is slowing. Some economists and investors believe individual companies can indicate overall economic health.

When does the business cycle occur?

Articulated for the first time in 1946 by economists and authors Arthur Burns and Wesley Mitchell, the business cycle is a concept that describes the ebb and flow of an economy's strengths and weaknesses. Often reflected in a country's GDP, the top of the business cycle occurs when economic growth has reached a point where it will stabilize for a short time, called a peak, before it reverses direction. The US economy normally enjoys a peak about every four to seven years on average.

How long is a normal cycle?

As you can see, a four- to six-year cycle is normal. Because economic data, like gross domestic product (GDP), isn't reported until 3-6 months after the period being measured, it is impossible to know exactly when a peak occurred until a few months after it actually happened.

What does it mean when an economic peak occurs?

The nature of a peak means that slower growth is on the horizon, which means successful companies will need to manage their output accordingly.

What Is a Business Cycle?

"Business cycles are a type of fluctuation found in the aggregate economic activity of nations…a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions…this sequence of changes is recurrent but not periodic." That description, from the 1946 magnum opus by Arthur F. Burns and Wesley C. Mitchell, Measuring Business Cycles, remains definitive today. 1 

What was the cyclical experience of the pre-WWII period?

The Varieties of Cyclical Experience. The pre-WWII experience of most market-oriented economies included deep recessions and strong recoveries. However, the post-WWII recoveries from the devastation wreaked on many major economies by the war resulted in strong trend growth spanning decades.

What are the three P's and three D's of recession?

These three P's correspond to the three D's of recession. An expansion begins at the trough (or bottom) of a business cycle and continues until the next peak, while a recession starts at that peak and continues until the following trough. The National Bureau of Economic Research (NBER) determines the business cycle chronology—the start ...

How long did the recession last in 1854?

In 1854–1899, they were almost equal in length, with recessions lasting 24 months and expansions lasting 27 months, on average. The average recession duration then fell to 18 months in the 1900–1945 period and to 11 months in the post-World War II period.

How is the severity of a recession measured?

A recession's depth is determined by the magnitude of the peak-to-trough decline in the broad measures of output, employment, income, and sales. Its diffusion is measured by the extent of its spread across economic activities , industries, and geographical regions. Its duration is determined by the time interval between the peak and the trough.

What is recession in economics?

A recession is actually a specific sort of vicious cycle, with cascading declines in output, employment, income, and sales that feed back into a further drop in output, spreading rapidly from industry to industry and region to region.

How does a business cycle recovery work?

On the flip side, a business cycle recovery begins when that recessionary vicious cycle reverses and becomes a virtuous cycle, with rising output triggering job gains, rising incomes, and increasing sales that feed back into a further rise in output. The recovery can persist and result in a sustained economic expansion only if it becomes self-feeding, which is ensured by this domino effect driving the diffusion of the revival across the economy.