Business cycles

An economy fluctuates between two phases: expansion and contraction but it needs to be noted that no two business cycles are the same.  Business cycles reflect movements of economic activity around a trend line that shows long-term growth.  An expansion begins when the economy starts to grow and continues until the economy reaches a peak.  After an expansion has peaked, a contraction begins and continues until the economy reaches a trough.

 

Watch the following video to understand the concept of a business cycle a bit better.