Unit 14 Info on the Business Cycle

The business cycle is the upward and downward movement of the economy (growth and decline of the economy)

Expansion An expansion is an upturn of the economy

that lasts at least two consecutive quarters of a year.

During an expansion, production and employment are up.

Peak A peak is the top of the business

cycle….period of prosperity. During a peak, production and employment are at their highest.

A boom is a very high peak, when things in the economy are at their absolute best.

Contraction The economy as a whole is in decline during a

Contraction. Production, employment and business activity starts to slow down and decline.

A contraction is after the peak but before the trough. A recession occurs if a contraction is severe.

Recessions tend to be shorter than expansions, with the average recession lasting about a year.

Trough A trough is the lowest point of the business cycle. (the

bottom). It occurs when real GDP levels off and slowing begins to increase.

In a trough, the production and employment are at their lowest.

A deep trough is called a slump or a depression. A depression is a large recession and is the worst part of the business cycle for the economy.