What best describes the business cycle?

The business cycle is best described as the alternating periods of economic expansion and recession. This concept encompasses the natural fluctuations in the economy, where phases of growth (expansions) are followed by periods of contraction (recessions). During an expansion, indicators such as employment and production typically increase, leading to overall economic growth. In contrast, a recession is characterized by a decline in economic activity, where GDP contracts, businesses may reduce production, and unemployment can rise.

Understanding the business cycle is essential, as it influences various aspects of the economy, including consumer confidence, investment decisions, and government policies. Over time, the cycle may exhibit patterns, but it does not indicate continuous growth or permanent decline. Other options that refer to either uninterrupted economic growth, stagnation, or consistent inflation fail to capture the inherent variability and rhythm of economic activities, which makes the observation of alternating expansions and recessions critical for a comprehensive understanding of economic dynamics.