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What is a business cycle? Use the term repression and depression to explain this concept.

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billybob77 | eNotes Newbie

Posted September 12, 2013 at 11:07 PM via web

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What is a business cycle? Use the term repression and depression to explain this concept.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 12, 2013 at 11:29 PM (Answer #1)

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First of all, please note that you are using the wrong word in your question.  “Repression” is a term used in psychology and in political science.  The proper economic term is “recession.”

A business cycle is a cycle in the macroeconomy in which the economy grows, comes to a peak, shrinks, and then hits bottom and starts back up again.  In other words, it is a cycle in which the national economy expands and contracts.

There are a few terms that are typically used when talking about business cycles.  First, there is “expansion.”  This is a time when the economy is growing.  The usual measure of economic growth is real Gross Domestic Product (GDP).  The next part of the cycle is a peak.  This is when GDP growth levels off and eventually stops.  The peak is followed by a recession, also called a contraction.  During this part of the cycle, real GDP declines.  A depression is simply a very bad recession where real GDP declines a lot and unemployment goes up a lot.  There is no set point at which a recession is bad enough to be called a depression.  Finally, the recession or depression ends by hitting a “trough.”  At that point GDP starts to go up again and the cycle begins anew.

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