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Business cycles are the rises and falls of real GDP over time. Business Cycles are divided into four or five phases. Some textbooks combine the recovery and expansion into the same phase and called that expansion phase. 1. Peak: This occurs when real GDP is at a temporary maximum. 2. Recession: Two consecutive quarterly decline in total output (real GDP) is called recession. 3. Trough: This is the bottom of the recession. After this point, GDP will start rising. 4. Recovery: This is the period between trough and the peak when real GDP is expanding . 5. Expansion: If real GDP rises beyond the recovery, this period is referred to as expansion. By observing the AD and AS model, business cycles can be determined. If the real GDP is below full employment GDP, the economy is in recession. Trough will be reached before the economy rebounds to the full employment level. If the economy's AD is strong enough to expand real GDP to a new level, then recovery and expansion will be experienced before the economy reaches a temporary new high, peak. Here are two links from Bureau of Economic Analysis. You may click the links for current economic data.
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