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Business Cycles

The business cycle refers to the natural fluctuation of economic activity over time, typically measured by changes in gross domestic product (GDP), employment, and other economic indicators. The business cycle has four stages: expansion, peak, contraction, and trough.

During the expansion phase, economic activity is increasing, with rising GDP, low unemployment, and increasing consumer and business confidence. The peak phase marks the end of the expansion and the beginning of a contraction, where economic growth slows, and employment growth slows or turns negative.

The contraction phase, also known as a recession, is characterized by declining economic activity, rising unemployment, and decreasing consumer and business confidence. Finally, the trough phase is the bottom of the business cycle where economic activity is at its lowest point before starting to recover again.

The length and severity of each phase of the business cycle can vary greatly, and the causes of business cycles are complex and can be influenced by a variety of factors, including monetary policy, fiscal policy, international trade, and technological advancements.

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