business cycle

noun
Updated on: 13 Oct 2017

Definition of business cycle

: a cycle of economic activity usually consisting of recession, recovery, growth, and decline

Recent Examples of business cycle from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'business cycle.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of business cycle

1858


Financial Definition of BUSINESS CYCLE

business cycle

What It Is

The business cycle refers to an economy's periodic patterns of growth, recession, and recovery.

How It Works

An expanding economy is characterized by low unemployment, high productivity, and high consumer spending. When there is a decline in productivity, business revenues start to decline. Companies, consequently, reduce their workforces to cut costs. This results in rising unemployment and lower consumer confidence and spending, which are all hallmarks of a recession.

As the recession weakens, incremental increases in productivity and revenues lead to an economic recovery. The unemployment rate is gradually reduced as companies begin hiring again. A decreasing unemployment rate leads to an increase in consumer confidence and spending, and the economy begins expanding again.

Why It Matters

Business cycles are of particular interest to economists and policy makers. Government intervention is often introduced during recessionary periods in an effort to hasten recovery. By studying the historical patterns of economic expansion and contraction, it may be possible to understand and forecast future economic trends.


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