The economic cycle is the fluctuation of the economy between periods of expansion and contraction. Factors such as gross domestic product, interest rates, total employment, and consumer spending, can help to determine the current stage of the economic cycle.
The four stages of the economic cycle are also referred to as the business cycle. These four stages are expansion, peak, contraction, and trough.
-During the expansion phase, the economy experiences relatively rapid growth, interest rates tend to be low, production increases, and inflationary pressures build.
-The peak of a cycle is reached when growth hits its maximum rate. Peak growth typically creates some imbalances in the economy that need to be corrected.
-This correction occurs through a period of contraction when growth slows, employment falls, and prices stagnate.
-The trough of the cycle is reached when the economy hits a low point and growth begins to recover.
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