Any economy has periods of increasing economic activity and periods of decreasing economic activity. This occurs in a fixed pattern, namely a period of increasing economic activity is followed by a period of decreasing economic activity, which is again followed by a period of increasing economic activity. This is a cyclical phenomenon (it occurs repeatedly) and is therefore called a business cycle.

Definition of a business cycle

• A business cycle is successive periods of increasing and decreasing economic activity.
• When economic activities increase, it is called an upswing of the business cycle, and when they decrease, it is called a downswing of the business cycle.
• The level of economic activities is indicated by increases and decreases in the real GDP.

Economics indicators

Measurements of specific economic activities are done to determine whether economic activity as a whole tends to increase or decrease. These measurements are called economic indicators.

The following items (economic activities) indicate whether economic activities for the economy as a whole tend to increase or decrease:

• employment, business confidence, motor vehicle sales, new businesses registered, retail sales, construction of new houses, and purchases of production machinery.

An increase in the extent of these items indicates an increase in economic activities in the economy as a whole and a decrease indicates a decrease in economic activities.