Unit 2: Business Cycle

Business Cycle - fluctuation in economic activity that an economy experiences over a period of time. 

4 phases 

  • Expansion- Spending increases ↑ Unemployment decreases ↓ best phase to be in ( ex . Construction )

  • Peak- The highest point of real GDP greatest spending lowest unemployment, however inflation becomes a problem.

  • Contraction/Recession - real GDP decline for 6 months (reduction of spending level , increase in unemployment)

  • Trough- lowest point of real GDP least amount of spending highest unemployment.

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