A business cycle can be defined as a period during which a business, an industry or even the whole economy undergoes a series of expansions and contractions. This cycle is determined and trailed with the use of Gross Domestic Product and redundancy or unemployment. The (GDP) gross domestic product will have an upswing and unemployment will wither in the course of the expansion phase and the reverse is true during recession periods. Irrespective of where one begins in this business cycle, one is expected to traverse through the four stages of a business cycle. These four stages of a business cycle include the following:
Expansion stage: where the economy is strong and people are in gainful employment and earning money
Peak/Prosperity stage: This is where the cost of goods and services increase and employees request for higher earnings.
Contraction stage: This is where prices of services and goods are too high forcing current and prospective customers to cut down on their spending and
The trough/recession stage: where decreasing market demand fuels decreasing prices, weakening
GDP and amassing the level of redundancy/unemployment
The phase recession basically means a downturn in trade and industry activity, but one should note that most economists prefer to use a precise explanation of “two uninterrupted quarters of deteriorating real GDP” for stagnation/recession. The drive of the market via business cycles also points out a number of economic relationships. Though growth shall rise and drop with cycles, a lasting inclination line for development is a possibility; when trade and industry growth is beyond the trend mark, joblessness typically falls.
The association concerning price increases/decreases and growth is unclear, but inflation tends to drop through recessions and thereafter upsurge through recoveries.
While this business/trade and industry cycle seems to be a fairly modest conception, there have been inordinate deliberations among economists pertaining to the factors that influence the span and scale of singular phases of this business cycle. Factors, such as if the government should play role in influencing this practice or not.
In contrast, a number of monetarist economists differ with the opinion of these cycles in total and would prefer to view the variations in the economy as non-cyclical instabilities. In most cases, they strongly believe that regressions in trade and industry activities are the outcome of monetary marvels and government increases and decreases of prices is ineffectual and destabilizing.