Business Cycle vs Economic Growth
Business Cycle and Economic Growth are related concepts in AP Economics that students often mix up. In short: business cycle is the business cycle is the fluctuation in economic activity over time, characterized by periods of expansion and contraction. Meanwhile, economic growth is economic growth is a sustained increase in an economy's real output, usually measured as the rise in real GDP or real GDP per capita. Here is how they compare side by side.
The business cycle is the fluctuation in economic activity over time, characterized by periods of expansion and contraction.
The business cycle represents the ups and downs in an economy's overall output, employment, and income. It consists of four main phases: expansion, peak, contraction, and trough. During an expansion, economic activity increases, while during a contraction, it decreases. The business cycle is influenced by various factors, including changes in consumer spending, business investment, government policies, and international events.
Economic growth is a sustained increase in an economy's real output, usually measured as the rise in real GDP or real GDP per capita.
It is shown by an outward shift of the production possibilities curve or a rightward shift of long-run aggregate supply. Sources include more capital, labor, and natural resources, plus better technology and productivity. Per-capita growth is the main driver of rising living standards.
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