Business cycles - Business in United States of America

Business cycles: Principal Features

Business cycles: A Different Cycle

Real Gross Domestic Product per Capita in the United States

Definition: Fluctuations in overall economic activity—expansions in overall output, followed by declines and subsequent revivals—that occur in countries where most of the goods are produced in private, for-profit firms

Significance: Business cycles have been an important part of American business history. For example, severe depressions occurred in 1818-1819, 1837-1843, 1873-1879, and 1929-1933, causing major declines in the standard of living of the average worker. Since the end of World War II, the strength of expansions has greatly exceeded contractions, resulting in significant business prosperity.

The term “business cycle” is slightly misleading, because fluctuations in overall output and related economic indicators do not occur at precisely regular intervals. These economic aggregates, however, do move with a degree of regularity that has been observed in the United States for nearly two hundred years. Business cycles vary greatly in magnitude as well as duration, yet they have certain features in common. First, they are national or international in scope. Second, they have direct impacts on production, employment, wages, prices, retail sales, construction, and international trade. Third, they are persistent, meaning that they last for several years. In general, the expansion in business activity lasts for a longer period of time than the decline. This result has been observed not only in the United States but also in Great Britain, France, and Germany.

Alan L. Sorkin

Further Reading

• Glasner, David, ed. Business Cycles and Depressions: An Encyclopedia. New York: Garland, 1997. Comprehensive volume that includes theories of business cycles and descriptions of individual panics or depressions. 
• Gordon, Robert J., ed. The American Business Cycle: Continuity and Change. Chicago: University of Chicago Press, 1986. Outstanding advanced treatise on the courses of business cycles and the economic policies that are formulated to deal with them. 
• McEachern, William A. Macroeconomics: A Contemporary Introduction. Mason, Ohio: Southwestern, 2006. Chapter 5 contains a good basic overview of the economic indicators of business cycles. 
• U.S. Department of Commerce. Economic Report of the President, 2008. Washington, D.C.: U.S. Government Printing Office, 2008. This report gives a detailed treatment of overall business conditions and provides large numbers of tables of relevant economic statistics. 
• Valentine, Lloyd, and Dennis Ellis. Business Cycles and Forecasting. Cincinnati: Southwestern, 1991. Well-written textbook for a basic course on business cycles. Readers should be familiar with the essentials of macroeconomics. 

See also: banking; Depression of 1808-1809; Great Depression; interest rates; Recession of 1937-1938; Securities and Exchange Commission; stock market crash of 1929.