The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or economic activity over several months or years. These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession).
The usual pattern of the business cycle is: bust, recovery, boom and recession. The levels of economic growth, employment, and inflation are directly affected in each of the phases of the business cycle. The business cycle has an impact also on corporate earnings and cash flows.
Business cycles are usually measured by considering the growth rate of real gross domestic product. Despite being termed cycles, these fluctuations in economic activity do not follow a mechanical or predictable periodic pattern.
Many developments and indicators are cited as causes of the business cycles. The most common ones, however, are: over-investment, under-consumption, fluctuations in agricultural output, the interaction of the multiplier and accelerator, war and international politics.
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