Chapter 16

Business Cycle

are defined as alternating increases and decreases in economic activity.

Peaks are followed by

downturns or recessions

A Peak

in the business cycle usually means the economy is operating at its capacity.

Once a recession

is under way, businesses react by curtailing hiring and perhaps even laying off workers, thus adding to the recession's depth.

A double-dip recession

occurs when an economy's recovery falls short and enters another recession before it fully recovers.

The four phases of the business cycle

the peak, followed by a recession, leading to the trough or bottom of the cycle, finally followed by a recovery or an expansion to another peak.

NBER economists identify

the turning points at which the economy switches from peak to downturn or from trough to recovery.