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business cycle

definition

The inevitable ups and down of economic activity, as measured by periods of economic growth and contraction. An economist uses key economic indicators to gauge where a local, regional, national, or international economy stands in the business cycle at any given time, including gross domestic product, inflation, unemployment, and productivity. As the central bank of the United States, the Federal Reserve uses monetary policy to stimulate growth during periods of contraction and to restrain the pace of growth during periods of expansion to prevent extremes in the cycles. See Depression; Federal Open Market Committee; Federal Reserve System; Inflation; Recession.