Business Cycle
Plain definition
The business cycle is the recurring pattern of expansions and contractions in overall economic activity around a long-run growth trend. A full cycle passes through four phases — expansion, peak, contraction (recession), and trough — and typically lasts several years.
In economics
Business cycles are the reason economies rarely grow smoothly: investment surges, credit booms, inventory swings, and policy changes push output above or below its trend. Economists distinguish the short-run cycle from long-run growth — cycles explain why unemployment and inflation fluctuate year to year, while growth theory explains the upward trend itself. Fiscal and monetary policy aim to dampen the cycle's swings without killing growth.
Example
The U.S. cycle from 2009 to 2020 shows the pattern: a long expansion after the Great Recession, a peak in February 2020, a sharp but brief contraction as COVID-19 hit, and a trough in April 2020 — followed by recovery. The National Bureau of Economic Research (NBER) officially dated each turning point months after the fact.
The business cycle is often confused with the stock market or with economic growth itself. Stock prices can fall without a recession (a market correction is not a cycle downturn), and the cycle is fluctuation around the trend — the long-run growth trend continues even as cycles swing above and below it. Also, cycles are irregular: no fixed length or predictable timing.