Question

Which of the following definitions best describes a business cycle

Activity that alternatives periods of growth and decline in an economic's GDP.
Business cycles represent the rise and fall of economic activity relative to LT growth trends.

Answer 1

A business cycle is characterized by the fluctuation of economic activity around a long-term growth trend, consisting of expansion and contraction phases. These phases are tracked using real GDP growth rates and help in forecasting economic conditions. A pronounced decline in GDP indicates a recession, while a prolonged and more severe downturn is termed a depression.

Step-by-step explanation:

Understanding the Business Cycle

A business cycle is a concept in economics that describes the economy's relatively short-term movement in and out of recession. It encompasses periods of macroeconomic expansion, or growth, followed by periods of contraction or decline. These fluctuations in economic activity happen around a long-term growth trend, and involve periods of rapid economic growth, known as expansions or booms, and periods of stagnation or decline, known as contractions or recessions. The growth rate of real gross domestic product (GDP) is often used to measure these fluctuations.

Although called cycles, these fluctuations do not usually follow a predictable pattern and are influenced by a wide range of economic factors. Understanding the different phases of a business cycle is important for predicting future economic performance. It is worth noting that during a significant GDP decline, economists classify this as a recession, while a longer and deeper decline would be considered a depression.

Answer 2

The second definition best describes a business cycle: "Business cycles represent the rise and fall of economic activity relative to LT growth trends." Business cycles are characterized by alternating periods of economic expansion and contraction, and are often measured by changes in Gross Domestic Product (GDP) and other economic indicators. These cycles can have significant impacts on businesses, consumers, and the overall economy.