The business cycle is the ups and downs of the general level of economic activity. All modern, industrialized countries have fluctuations in their rates of economic activity, leading to the observation that one nation's economy is "booming" while another economy is in a "recession." When an economy goes from a positive to a negative rate of growth, it is said to have reached a "peak" and entered a recession. When an economy goes from a negative to a positive rate of growth, it is said to have reached a "trough" and entered a "recovery."

What Is the Business Cycle?

Although something worthy of being called "the business cycle" does exist, attempts at finer classifications or subcategories of business cycles have not been particularly fruitful. Some economists have simply used a broad dichotomy between "major" and "minor" cycles. Descriptively this can be meaningful. A particularly severe recession...