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Economic Fluctuations: Definition & Model

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  • 0:00 What Are Economic…
  • 0:31 Business Cycle
  • 1:46 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Economies go up, and economies go down. In this lesson, you'll learn about economic fluctuations, including what they are as well as look at the dominant model.

What Are Economic Fluctuations?

Economic fluctuations are simply fluctuations in the level of the national income of a country representing growth or contraction. A market economy is not static. It's dynamic. A rise in national income means an economy is growing, while a decline in national income means that an economy is contracting. The current economic model describing economic fluctuations in a market economy is the business cycle.

Business Cycle

The business cycle is a pattern of economic fluctuations describing the periods of economic growth, contraction, and the transitions in between. If you plot these periods on a graph, you'll see peaks and troughs, ups and downs.

The business cycle consists of four phases. Let's take a look at each:

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