What characterizes the business cycle?

The business cycle is characterized by fluctuations in economic activity. This means that the economy experiences periods of expansion and contraction over time. During the expansion phase, economic indicators such as GDP, employment, and consumer spending rise, reflecting a growing economy. Conversely, during a contraction phase, these indicators decline, leading to slower economic activity, higher unemployment rates, and reduced consumer spending.

This cyclical nature of the economy is essential in understanding how various factors, such as consumer confidence, interest rates, and government policies, can influence economic performance over time. The business cycle thus captures the dynamic nature of an economy, moving through these alternating phases rather than following a path of continuous and unchanging growth.