business cycle

noun
Updated on: 26 Jul 2017

Definition of business cycle

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

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.


Learn More about business cycle


Seen and Heard

What made you want to look up business cycle? Please tell us where you read or heard it (including the quote, if possible).

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!

WORD OF THE DAY

alert quickness of mind or body

Get Word of the Day daily email!

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!