Business Cycle Graphs

Business cycle graphs are a visual display of the difficulties of a business. The business cycle is an irregular up and down movement that shows the economic activity of any business. Generally, it is not used for an individual business, but the total economic cycle of business activity of any country. This can be shown on a graph or diagram for better clarification.

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It doesn't matter if you are looking at the business cycle of a company or the larger picture of a country's economic climate. There is one thing that is common to all business cycles. The business cycle is unpredictable. It is neither regular nor repeating. It is random in its timing, although it does follow the same basic path. This path is a composition of four basic phases.

• Phase One: Contraction: The first phase is contraction, or the slowing of the pace of the economic activity.

• Phase Two: Trough: In the second phase, there is a lower turning point noticed. This is when the business cycle starts to turn from contraction into an expansion. It is the turn up, so to speak, of the cycle.

• Phase Three: Expansion: In the third phase, there is a speed up of the economic activity. This increased pace causes the rise in the graph if it was on display in a chart.

• Phase Four: Peak: The final phase is the peak, or the top level of the economic activity. This is the highest point of the economic growth seen during the expansion phase. The peak is never certain until it has hit and the first phase of the business cycle has happened. At the peak, there is an upper turning in the business cycle.

Other components are in the business cycle and should be present in a graph. For example, if the contraction portion of the business cycle is severe enough, there would be a label for a recession occurring. If there is a severe trough phase, then the slump is a depression.

In the economic activity of a country, this type of graph is often used to describe the overall health of the economy. The economy is doing well during growth periods and is at its best during the peak four phase. Yet there is no way for anyone to tell if the peak occurred or how deep the trough phase is. There are economic indications that tend to point in one direction or another.

The job of a business cycle graph is to explain the current conditions. For example, the business can be growing and flourishing and may be working towards the peak stage. On the other hand, in times when the business is struggling, it can be in a period of contraction or even trough. This is visible by the up and down movements of lines, bars, or other tools on a graph.

To create business cycle graphs it is important to have all necessary information on hand. When using a graph to describe the economic conditions of a country, the country's GDP, or Gross Domestic Product, is one indication that should be included and referenced. Consumer spending is another indication of the business cycle's movements. In a business level graph, the company's sales, expansion and overall growth is in use to pinpoint where the company stands. If the company owes money, it is in a contraction period.

Business cycle graphs are most often in use to describe the economy of a country. They can come about by gathering key data on the economic health of a company or country. When used, they can often show economists specific areas of interest, called indicators, which may be in use to give an idea of where the movement is heading. Even with the use of indicators like this, it is impossible to know what will happen next.

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