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Sagot :
Answer:
It is the fluctuations of GDP around the potential output
Explanation:
Business cycle refers to the fluctuations of Gross Domestic Product around the potential output. It refers to the expansion and contraction of GDP around its potential output or its long term natural growth rate
In an boom, GDP is above the potential output and in a contraction, GDP is below the potential output
There are 4 stages of business cycle
1. Expansion - At this stage unemployment is low and economic indicators are positive. Money velocity is also high
2. Peak - this is the highest point of economic expansion. The economy cannot grow beyond this point. From this point, the GDP starts to decline
3. Recession : It is the stage after a peak. The positive economic indicators start to decline
4. Depression
Trough - growth rate becomes negative
6. recovery : the economy begins to expand again
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