A downturn in the business cycle is characterized by several factors that can be seen across different economic measurements. These include negative or very low economic growth, rising unemployment, falling asset prices – shares and house prices, low consumer confidence and decreasing business investments.
Based on the web search results provided, we can look at how each of these characteristics can be defined. According to Khan Academy, a business cycle is an up and down movement of economic performance, and it usually consists of four basic phases: expansion, peak, contraction and trough. During an expansion, real Gross Domestic Product (GDP) increases and unemployment decreases. This is followed by a peak, which is the turning point in the cycle, and the beginning of a contraction. During a contraction, real GDP declines and unemployment increases, and the cycle is completed by a trough, when real GDP is at its lowest.
Economic downturns are defined by Economics Help as having several features, including negative or very low economic growth, rising unemployment, falling asset prices – shares and house prices, low consumer confidence and decreasing business investments. Investopedia defines a business cycle as a sequence of economic expansions and contractions that generally occur over a period of time. It is characterized by four phases: expansion, peak, contraction and trough. During an expansion, GDP and employment rise, while during a contraction, GDP and employment decrease.
Knowing the different characteristics of an economic downturn and a business cycle can help individuals make more informed decisions when it comes to investments and other economic activities. Knowing the phases of the cycle and what can or cannot be expected during each phase can help individuals better prepare for any upcoming events.