Economic/Business Cycle

Typical Business Cycle

The business cycle or economic cycle refers to the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The FIVE stages of the business cycle are growth (expansion), peak, recession (contraction), trough and recovery. Despite being named cycles, these fluctuations in economic growth and decline do not follow a purely mechanical or predictable periodic pattern. There are several factors that affect the economic aspects of a given country or region such as Politics, Policies, Social aspects, Technological aspects. This cycle is generally measured by an economic indicator called GDP "Gross Domestic Product" A business cycle is referred to be in expansion when there is a speedup of the pace of the economic activity. Recession refers to the slowdown of the pace of the economic activity. The maximum economic activity within a period of time is called a peak and the lowest activity within a period is called a trough. An economy is described to be in recovery in the transition period between contraction and expansion.

This GDP indicator is formulated according to the aggregate performance of the economy in terms of many business factors such as employment, personal income, trade sales, industrial production, etc. It could be impacted by macro or micro-environmental forces which obviously affect the economy. A cycle could be an aggregate of all policies, procedures affecting the economy undertaken by a given country. For example, policies providing investment opportunities and encouraging large scale production could have a positive impact on a cycle in the recovery or expansion stages. Policies against external investments might have negative impact on a cycle in the contraction stage. Moreover, these cycles might be associated with both booms and crises in the international economy. For example, countries strategically linked to the USD would be directly affected by the US economy and the US economic crisis last year is a good witness.

In order to get a real sense of the article, you got to know that time frames of these cycles are measured in YEARS.

Check this powerful tool at this LINK and it might give a good understanding of what we said above. Check USA and check GDP only (don't bother yourself with other indicators) and move the bar at your left hand side and see how the GDP was in 2008 and how it reaches the 2010 where it enters a recovery and expecting to get above normal trends in 2011.

Another detailed article may be found here.