(Macro) Episode 23: Business Cycles NARRATOR: By definition, the business cycle is the recurrent swings in real GDP. What this means is that if you watch real GDP over time, it follows a wavelike pattern, or a cycle. It rises, hits a peak, falls, hits a low point, rises, and so on. The hope is that over time, there is a long-term upward or growth trend. The stages of the business cycle are always the same, although the length and severity of the swings are not. Let's say that we started at the peak or high point of a cycle. The peak is followed by a downturn in the economy -- declining real GDP, or a recession. Eventually, the real GDP hits its low point for that cycle, or its trough. Once the cycle has hit its low, we start to see expansion again, until we hit the next peak. The fact that the economy moves in cycles leads some economists to question the wisdom of a hands-on, activist role for the government in trying to correct problems in the economy. But that is a discussion for another day. NEXT TIME: Aggregate demand and aggregate supply