business cycle

(noun)

A fluctuation in economic activity between growth and recession.

Related Terms

Examples of business cycle in the following topics:

  • The Business Cycle: Definition and Phases

    • The term business cycle refers to economy-wide fluctuations in production, trade, and general economic activity.
    • The term "business cycle" (or economic cycle or boom-bust cycle) refers to economy-wide fluctuations in production, trade, and general economic activity.
    • From a conceptual perspective, the business cycle is the upward and downward movements of levels of GDP (gross domestic product) and refers to the period of expansions and contractions in the level of economic activities (business fluctuations) around a long-term growth trend .
    • Business cycles are identified as having four distinct phases: expansion, peak, contraction, and trough.
    • Business cycle fluctuations occur around a long-term growth trend and are usually measured by considering the growth rate of real gross domestic product.

  • Calculating Economic Growth

    • The business cycle refers to economy-wide fluctuations in production, trade, and economic activity over several months or years.
    • The short-run variation in economic growth is called the business cycle.
    • The changes in the business cycle are a result of fluctuations in aggregate demand .
    • The business cycle is used to determine the short-run variation in economic growth.
    • Variations in the business cycle fluctuation over months and years and are attributed to fluctuations in aggregate demand.

  • Managing the Business Cycle

    • The business cycle is comprised of the upward and downward movement in the level of Gross Domestic Product (GDP) over time .
    • Identify how changes in monetary and fiscal policy can manage the business cycle, and why that is desirable

  • Recessions

    • A recession is a business cycle contraction; a general slowdown in economic activity.
    • In economics, a recession is a business cycle contraction; a general slowdown in economic activity.
    • Macroeconomic indicators such as GDP (Gross Domestic Product), employment, investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise.
    • Supply-side economists may suggest tax cuts to promote business capital investment.

  • Disinflation

    • Disinflation is a decline in the rate of inflation, and can be caused by declines in the money supply or recessions in the business cycle.
    • It can also be caused by contractions in the business cycle, otherwise known as recessions.

  • Effect of a Government Budget Deficit on Investment and Equilibrium

    • A cyclical deficit is a deficit incurred due to the ups and downs of a business cycle.
    • At the lowest point in the business cycle, there is a high level of unemployment.
    • The additional borrowing required at the low point of the cycle is the cyclical deficit.
    • This type of budget deficit serves as a stabilizer, insulating individuals from the effects of the business cycle without any specific legislation or other intervention.
    • The structural deficit is the deficit that remains across the business cycle because the general level of government spending exceeds prevailing tax levels.

  • Arguments for and Against Balancing the Budget

    • A cyclically balanced budget is a budget that is not necessarily balanced year-to-year, but is balanced over the economic cycle, running a surplus in boom years and running a deficit in lean years, with these offsetting over time .
    • decrease interest rates, making it easier for businesses and individuals to invest;
    • Keynesian economists argue that government budgets should be balanced over the business cycles.
    • Once an economy moves into a growth cycle, Keynesians believe the government should shift its perspective and try to run a budget surplus by decreasing spending and increasing taxes.
    • John Maynard Keynes founded the Keynesian school, which promotes balanced governmental budgets over the course of the business cycle as opposed to annual balanced budgets.

  • Expansionary Versus Contractionary Fiscal Policy

    • Keynesian economists argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector in order stabilize output over the business cycle.
    • Keynes advocated counter-cyclical fiscal policies (policies that acted against the tide of the business cycle).
    • This extra spending allows businesses to hire more people and pay them, which in turn allows a further increase in spending, and so on in a virtuous circle.

  • The Effect of Restrictive Monetary Policy

    • Businesses then, presumably, have less money to use to expand its operations or even maintain its current levels.
    • Restrictive monetary policy is used during expansion and boom periods in the business cycle to prevent the overheating of the economy.

  • Austrian

    • Opportunity Cost: This is a concept you are likely already familiar with, and one of the most important ideas in all of business and economics.
    • Basically each choice a consumer or business makes intrinsically has the cost of not being able to make an alternative choice.
    • Business Cycles:The Austrian business cycle theory (ABCT) is the simple observation that the issuance of credit (by banks) creates economic fluctuations that tend to be cyclical (see ).
    • So when businesses fail more often than they succeed, thus losing interest as opposed to accruing it, will struggle to repay their debts.
    • When the banks call in those debts the business cannot pay, creating negative business cycles.