Difference between business cycles and business fluctuations:
Business cycle:
Business cycle is the downward or upward movement of the GDP (gross domestic product) around the long term of the economic trend and it has four distinct phases as follows,
- Expansion - increased growth in the economy
- Contraction - growth slows down
- Trough - economy hits the bottom
It is also called as trade cycle or economic cycle.
Business fluctuation:
In economic activity, the increase or decrease is measured corresponding to increase or decrease respectively in real GDP.
Note: Recently, economic theory have moved towards economic fluctuations rather than a "business cycle". Although few economists use the term 'business cycle' as a convenient shorthand.
Example: Milton Friedman says that calling business cycle a "cycle" is a misnomer, because of the non-cyclical nature.
- Business cycles are EVALUATED by the "National Bureau of Economic Research" in the US.