Final answer:
The statement that the business cycle can be characterized by four stages: expansion, recession, depression, and revival is false. The business cycle typically includes four phases: expansion, peak, recession (or contraction), and trough, not depression and revival. This cycle is crucial for understanding economic fluctuations. Depression is considered an extreme recession but not a distinct phase of the cycle.
Step-by-step explanation:
The typical phases of the business cycle are expansion, peak, contraction (or recession), and trough. Depression may be considered a severe form of recession, but it is not a standard phase of the business cycle. During the expansion phase, the economy experiences growth, which slows down and reaches the highest point called the peak. Afterward, economic activity decreases during the recession or contraction phase until it hits the lowest point, known as the trough, which leads to a revival or recovery phase, and the cycle begins anew.
The business cycle is critical to understanding the economy's performance and predicting future trends. It represents the fluctuation of economic activity around a long-term growth trend and is measured using real gross domestic product (GDP). Recessions and depressions, while both signaling downturns, differ in length and severity. The National Bureau of Economic Research (NBER) defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months. A depression is a more extreme and prolonged downturn, which is exemplified by the 1930s Great Depression.
Looking at the historical patterns, for instance in tables such as Table 1 and Table 19.7, analysts can notice trends, such as the three longest expansions in the twentieth century occurring post-1960. The recent recession started in December 2007 and ended in June 2009, marking the most severe economic contraction since the Great Depression.