How an Economic Cycle Works

“The economic cycle is the fluctuation of the economy between periods of expansion (growth) and contraction (recession).”

Introduction

Expansion

Decreasing Interest Rates

Increase in Demand

Government Intervention

Peak

“When an economy is producing at maximum output and employment is at or above full employment, an economy is said to be at its peak.”

Maximum Economic Output

Contraction

“A recession, known as the contraction stage, begins just after the economy reaches a peak of activity and ends as the economy reaches its trough.“

Paying Back Debt

The Unforeseen

The NBER identifies a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, and industrial production.”

Trough

Conclusion

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