The economic cycle, also known as the business cycle, refers to the natural fluctuations in economic activity over time. It consists of four phases: expansion (growth in GDP, employment, and income), peak (the highest point before decline), contraction/recession (decline in economic activity), and trough (the lowest point before recovery). Factors like consumer demand, investment, government policies, and external shocks influence these cycles.

Governments and central banks use fiscal and monetary policies to stabilise the economy, stimulating growth during downturns and controlling inflation during booms. Understanding the economic cycle helps businesses and investors make informed decisions, minimising risks and maximising opportunities in changing economic conditions.