Economic Cycle

Quick Summary of Economic Cycle

Predictable long-term pattern changes in national income. Traditional business cycles undergo four stages: expansion, prosperity, contraction, and recession. After a recessionary phase, the expansionary phase can start again. The phases of the business cycle are characterized by changing employment, industrial productivity, and interest rates. Some economists believe that stock price trends precede business cycle stages.

The economic cycle is the periodic fluctuation of the economy between periods of growth and contraction. The major phases of the economic cycle are expansion, prosperity, contraction and recession. Governments and central banks often intervene to smooth the peaks and valleys of the economic cycle. For example, the Federal reserve may restrict the money supply in good times to slow the expansion phase of the economic cycle, and deficit spend and cut interest rates to ease the recessionary phase of an economic cycle.

Inappropriate intervention can lead to significant failures. Attempting to lengthen the expansionary phase of the economic cycle, for example, can lead to a speculative bubble which can, in turn, magnify an ensuing downturn. Economists do not generally believe it is possible to eliminate the economic cycle.

Examples of Economic Cycle in a sentence

You should always know where you stand in the economic cycle and be ready to adapt to what is next.

They were in a downward economic cycle. They knew it would eventually recover, but they just needed to hold on and make smart decisions.

When the U.S.’s economic cycle idled in the recession phase, lawmakers tried various tactics, such as lowering interest rates, to attempt a resurgence of the U.S. economy.

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