MAC - Business Cycle Lesson

The Business Cycle

Graph depicting peaks and troughs of the business cycle through expansion and contraction as you track real GDP.

Graphing real GDP over time allows us to visualize what is referred to as the business cycle. Most economies grow over time but still experience economic downturns. A downturn is characterized by a significant decline in aggregate economic activity, lasting a few months. Statistics like real GDP, unemployment rate, and inflation rate give us clues as to the health of the economy. The two phases of the business cycle are contraction and expansion/recovery. In between these two phases are the peak and the trough.

What is happening in the economy during each stage of the business cycle?

Stages of the Business Cycle
Recovery/Expansion Peak Contraction/Recession/Depression Trough
Real GDP is... Increasing At its highest Decreasing At its lowest
Unemployment rate is... Decreasing --- Increasing ---
Prices/Inflation rate/CPI is... Increasing --- Decreasing ---

Business Cycle Practice and Vocabulary Review

IMAGES CREATED BY GAVS OR FOUND IN THE PUBLIC DOMAIN