Legal Definitions - business cycle

The business cycle refers to the regular pattern of growth and decline in economic activity. It is a natural occurrence in any economy and can be seen in the fluctuations of gross domestic product (GDP), employment rates, and other economic indicators.

• During an expansion phase, businesses are hiring more workers, consumers are spending more money, and the economy is growing. This can lead to inflation and higher interest rates.
• During a contraction phase, businesses may lay off workers, consumers may cut back on spending, and the economy may shrink. This can lead to deflation and lower interest rates.

For example, during the expansion phase of the business cycle, a company may decide to invest in new equipment and hire more employees to keep up with demand. However, during the contraction phase, the same company may have to lay off workers and cut back on spending to stay afloat.