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Business Cycle

The business cycle is a pattern of fluctuations in economic activity, characterized by periods of growth (expansions), followed by periods of contraction (recessions). The business cycle is a natural part of the economy and is driven by a combination of factors, including changes in consumer spending, investment, and government policies.

Expansions are characterized by increased economic activity, rising employment and income, and rising prices. During this phase of the business cycle, businesses are confident and are more likely to invest in new projects and hire new workers.

Recessions are characterized by declining economic activity, rising unemployment, and falling prices. During this phase of the business cycle, businesses are more cautious and are less likely to invest in new projects or hire new workers.

The length and severity of business cycles can vary, and there is no set timeline for when one phase of the business cycle will transition to the next. However, understanding the business cycle is important for businesses and policymakers, as it can help them to prepare for changes in the economy and make informed decisions about investments, hiring, and other business practices.

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