What is a business cycle and how does it impact the economy?

Answer 1

A business cycle is the recurring pattern of economic growth and contraction in an economy. It consists of four phases: expansion, peak, contraction, and trough. During an expansion, the economy grows, leading to increased employment and consumer spending. At the peak, the economy reaches its highest point before starting to decline during the contraction phase. This leads to decreased economic activity, job losses, and reduced consumer spending. The trough is the lowest point of the cycle before the economy starts to recover and enter a new expansion phase. The business cycle impacts the economy by influencing factors such as employment, inflation, interest rates, and overall economic growth.