What defines the business cycle?

The business cycle is defined by fluctuations in economic activity over time, which includes periods of expansion, peak, contraction, and trough. This cyclical movement reflects changes in the overall economy, such as variations in GDP, employment levels, and consumer spending. Understanding the business cycle is essential for analyzing economic trends, making predictions, and implementing appropriate fiscal and monetary policies.

The concept encompasses both growth phases, where the economy is booming, and recessions, where economic activity declines. This dynamic nature of the economy highlights the importance of monitoring these fluctuations to gauge overall economic health and to inform decision-making for businesses, investors, and policymakers.