The business cycle or economic cycle refers to the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of the business cycle are growth (expansion), peak, recession (contraction), trough and recovery.
At one time, business cycles were thought to be extremely regular, with predictable durations. But today business cycles are widely known to be irregular - varying in frequency, magnitude and duration. These fluctuations are often measured using the real gross domestic product. One of the government’s main roles is to smooth out the business cycle and reduce its fluctuations.
A business cycle is not a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock. Its timing is random and, to a large degress, unpredictable.
To call those alternances “cycles” is rather misleading as they don’t tend to repeat at fairly regular time intervals. Most observers find that their lengths (from peak to peak, or from trough to trough) vary, so that cycles are not mechanical in their regularity. Since no two cycles are alike in their details, some economists dispute the existence of cycles and use the word “fluctuations” (or the like) instead. Others see enough similarities between cycles that the cycle is a valid basis of studying the state of the economy. A key question is whether or not there are similar mechanisms that generate recessions and/or booms that exist in capitalist economies so that the dynamics that appear as a cycle will be seen again and again.
