The business cycle is the periodic but irregular
up-and-down movements in economic activity, measured by fluctuations in real
GDP and other macroeconomic variables. The recurring and fluctuating level of
economic activity that an economy experiences over a long period
of time is the correct definition of the business cycle. The five stages
of the business cycle are growth (expansion), peak, recession (contraction),
trough and recovery. At one time, business cycles were thought to be extremely
regular, with predictable duration, but today they are
widely believed to be irregular.
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Read more: http://www.investopedia.com/terms/b/businesscycle.asp#ixzz2CYocFmEd
In general, a business cycle describes changes in the demand-side of the economy as measured by GDP. In other words, it is basically the lack of stability in a business. The picture below describes the steps of the business cycle.
"Investopedia explains 'Business Cycle'
Since the World War II, most business cycles have lasted three to five years from peak to peak. The average duration of an expansion is 44.8 months and the average duration of a recession is 11 months. As a comparison, the Great Depression - which saw a decline in economic activity from 1929 to 1933 - lasted 43 months."
Read more: http://www.investopedia.com/terms/b/businesscycle.asp#ixzz2CYocFmEd
In general, a business cycle describes changes in the demand-side of the economy as measured by GDP. In other words, it is basically the lack of stability in a business. The picture below describes the steps of the business cycle.
One of the great benefits of understanding the business cycle is it can provide a strategic framework for economic activity and investing. For businesses, understanding it is a must.
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