Every economy has its ups and downs. All businesses go through great times, where they are probably making more money than they know what to do with. They also go through rough times though , when they can barely make ends meet. There are many ways a person can view the productivity of businesses, and their effect on the economy. In order to see whether things are doing well or not, either now or in the past, a person can take a look at what is called a business cycle. The business cycle, according to Paul Gregory's definition in our Essentials of Economics textbook, is the pattern of upward and downward movement in the general level of real business activity. In my own definition, the business cycle is a graph that shows you weather businesses in relation to the economy are in good or bad phases of production, and how long these phases last. The graph looks like a wave. The points plotted horizontally represent time, and the points plotted vertically show the level of economic activity.
The business cycle is divided into four parts or phases. The phases include recession, trough, recovery or expansion, and peak. The first phase is the recession. A recession is a known as a temporary decline in economic .
activity. That is exactly how it is portrayed in the business cycle. During this .
phase, which is also referred to as the downturn phase the businesses arenâ€™t doing very well. They begin to have a decline in their output levels. This usually lasts about 6 months or more. Soon this decline in output will result in lower incomes, higher unemployment rates, and a loss of profits for the them. All of this will then in turn result in a decline in economic activity. The second phase is called the trough. This is when the businesses have reached their low point. The recession has stopped. Once businesses have reached this point, they can now gradually move on to the third phase. This phase is known as recovery or expansion.