Series 79: Elements Of A Business Cycle

Elements of a Business Cycle

A full business cycle is comprised of four phases: expansion, peak, contraction, and trough. The progress of a business cycle is often measured by reference to the gross domestic product (GDP), which is the aggregate market value of all completed goods and services produced within a given country in a single year.

• • Expansion. When the economy is in expansion, it exhibits above-average growth. Economic activity increases, and consequently so does GDP. Unemployment tends to fall during an expansion. Fast expansion is sometimes referred to as a boom.
• • Peak. The peak is the maximum point of economic activity in an expansion. It marks the end of an expansion, and the beginning of a contraction.
• • Contraction. During a contraction, economic gr