Four Phases of the Business Cycle

How it impacts our lives

Expansion

The expansion or growth stage of the business cycle is shown by a strong economy. During this phase, people are making money and the demand for goods and services starts to increase. This results in the increased demand for goods and services. The demand often begins to exceed the supply, which makes higher prices for goods and services. This is what we call inflation.

Downturn

An economic downturn follows the peak of an economic boom. A downturn is characterized by slowing economic growth, which can lead to higher unemployment and lower consumer confidence. Consumer demand is likely to fall during a downturn, which can make it harder for businesses to maintain profits and for new businesses to do well.

Recession

A recession is a period of economic hardship that occurs after a downturn. During recessions their is a negative economic growth. Recession periods tend to lead to high unemployment and low consumer demand and creates a poor environment for business. Companies often lay off workers and employ other cost-cutting measures in order to survive. Recession periods lead to a low point called a trough, then economic growth and employment begin to increase.

Recovery

A recovery is a phase of the business cycle that follows a recession. It iit can be felt by falling unemployment and increasing economic growth. As recovery accelerates, business conditions start to improve, which can help new companies enter the market. Then history repeats itself because recovery periods lead to economic booms and then the cycle begins again.