The term business cycle refers to economy-wide fluctuations in production, trade, and general economic activity. There are four phases that describe the business cycle. At any point in time you are in one of these stages:
- Contraction - When the economy starts slowing down. It's usually accompanied by a bear market.
- Trough - When the economy hits bottom, usually in a recession.
- Expansion - When the economy starts growing again. It's usually signaled by a bull market.
- Peak - When the economy is overheated, and is in a state of "irrational exuberance." This is when inflation rears its ugly head.
