What is The Business Cycle? | The Business Cycle Explained | IB Macroeconomics

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In this step you'll learn about the business cycle and its fluctuations in economic activity. The business cycle is the periodic fluctuations in economic activity measured by changes in real GDP. It is made up of four phases: peak, contraction, trough and expansion. During an expansion phase, unemployment decreases and real GDP is greater than potential GDP. During a contraction phase, unemployment increases and real GDP is less than potential GDP. Additionally, inflationary pressure is present during expansion and deflationary pressure is present during contraction.