Economic cycle


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Economic Cycle

The period of time during which an economy evolves from a state of health to fragility to recession to recovery and back to health. Every capitalist economy has cycles to a greater or lesser extent. However, regulations may be designed to curtail them (or, more accurately, to attempt to maximize the good times while preventing the bad times); this is rarely successful. Factors affecting economic cycles include the level of inflation, the availability of capital, natural disasters, and political events. Some industries are considered countercyclical, meaning that demand for their products remains relatively constant regardless of economic circumstances; some even do better in recessions. Other industries, mainly those considered luxuries, are greatly dependent on economic cycles. An economic cycle is often colloquially called a boom-and-bust cycle.

Economic cycle.

An economic cycle is a period during which a country's economy moves from strength to weakness and back to strength.

This pattern repeats itself regularly, though not on a fixed schedule. The length of the cycle isn't predictable either and may be measured in months or in years.

The cycle is driven by many forces -- including inflation, the money supply, domestic and international politics, and natural events.

In developed countries, the central bank uses its power to influence interest rates and the money supply to prevent dramatic peaks and deep troughs, smoothing the cycle's highs and lows.

This up and down pattern influences all aspects of economic life, including the financial markets. Certain investments or categories of investment that thrive in one phase of the cycle may lose value in another. As a result, in evaluating an investment, you may want to look at how it has fared through a full economic cycle.

References in periodicals archive ?
In other words, it reserves the right to shift the goalposts by shifting the timing of the economic cycle.
Investec chief economist Philip Shaw said: "The Chancellor's back-dating of the economic cycle has all but ensured he will meet his fiscal rules
Economists had warned that Mr Brown was about to break his 'golden rule' of only borrowing to invest over the current economic cycle, but the change to the start date should ensure he will not do so.
The expansionary phase of the 13th postwar economic cycle lasted just 22 months, the shortest since the end of World War II, the Cabinet Office said after Cabinet office officials met with a study group assigned by the government to research economic-related indexes.
The pan-Nordic financial group Handelsbanken has reportedly said that Finland's economy was experiencing a traditional positive economic cycle.
Moreover, since all markets have varying economic cycles, we wanted to establish our firm in several different industries to stay consistently active.
As John McKean so eloquently states, marrying data driven analytics with consumer insight is critical for managing through tough economic cycles.
The Chancellor' critics have accused him of manipulating the date when the economic cycle ends so as to meet the golden rule.
In the following economic cycle, revenues from oil companies would boost revenues by at least pounds 2bn a year.
Mr Brown is confident he can meet the rule - to borrow only to invest on average over the economic cycle - with an overall margin of pounds 6bn, narrower than the pounds 8bn he forecast at the Pre-Budget report in December.
I think we're in the middle of a long-term economic cycle that in the last 108 years has delivered two periods where gold produced superior returns and we've entered the third period in the summer of 1999 with another six years to go.
As a result, bankruptcies have tended to rise with the economic cycle, when the banks' improving earnings allow them to deal with problem borrowers more aggressively.

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