The Economic Cycle

The Economic Cycle
A term used to describe the tendency of economic activity to cycle along its trend path
Real GDP shows a series of peaks and troughs along its trend,characterising booms,slowdowns,recessions and recoveries
All countries experience economic cycles
The Need for Macroeconomic Stability
Large fluctuations in output,employment and inflation add to uncertainty for business and consumers,and can reduce the economy's long-term growth potential
Stability allows businesses,individuals and the Government to plan more effectively for the long term,improving the quantity and quantity of investment in physical and human capital and helping to raise productivity