GDP cannot remain stable for a long time in most countries of the world. They either expand their industry or run in debts. Business cycle is a change in economic activity such as an expansion or recession that happened over a period of time. Business cycles have their official dates imposed by the National Bureau of Economic Research in the US. According to the data provided by NBER, America experienced 11 business cycles for the last 50 years. The researchers concluded that the periods of expansion were much longer than the periods of recession during these cycles.
Business cycles provide an important information to the investors. No one seeks to put money into a stagnating economy. The period of Great Recession made equity indexes decline all around the world – investors that incurred losses could not take any more risks with the remaining stock. Periods of expansion are much longer than the recession span, nevertheless, the threat of financial downfall always exists. Economists link expansion with speculation in the market that one day suddenly starts to drag businesses down. The recession of the early 2000s happened due to the excessive popularity of online stocks, and the recession of 2009 was caused by speculations in the American housing market.
For the last 50 years, an average business cycle lasted nearly six years. Since 1990, the period of expansion took almost 95 months as compared to the period of recession that lasted 11 months.