Business cycle
The business cycle describes fluctuations in economy-wide activity around its longer-term path. Expansion involves rising activity, while contraction involves falling activity; peaks and troughs mark turning points. Output, employment, investment and consumer spending can move together, but their timing and strength vary. Cycles are irregular rather than a fixed timetable, and the experience of a particular industry or business can differ from the economy as a whole.
Worked example
During a contraction, a supplier faces fewer customer orders and slower payment. It reassesses its cash forecast and inventory plans rather than assuming that the previous year’s growth will continue.
Common mistake
A slowdown in growth is not necessarily an outright fall in output. Do not assume every sector enters or leaves a downturn simultaneously.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | BT | Direct | September 2026–June 2027 |
| FIA | FBT | Direct | September 2026–June 2027 |