a)Give a definition of the business cycle

a. Give a definition of the business cycle

Business cycle is defined as the change in trends of the activities in the economy. There can be upwards and downward movements in the overall production level in the economy, the business cycle tend to find out these movement. It also determines the recessionary or inflationary phase in the economy. The business cycle has four phases.

b. Describe the four (4) phases of the business cycle

The first phase in the business cycle is the phase of expansion. The expansionary phase in the economy is considered to be the phase of rapid growth. During this phase there is low interest rate, level of production is high, and inflation keeps of increasing.

The second phase in the business cycle is the phase of peak. It is the phase of maximum growth.

The third phase in the phase of contraction. During this phase, the economic activity tends to contract, growth decreases, and price level starts to stagnate.

The fourth phase is the phase of trough in which the growth in the economy is lowest and recovery of growth takes place.