The business cycle
The economy's five phases, and how central banks and governments respond.
For educational purposes only. Simplified illustrations to help you understand how things work. Not financial, investment or tax advice, and not a recommendation.
Expansion
- Growth speeding up
- More jobs
- Inflation building
Central bank
Interest rates↑ Raised gradually
Bond buying↓ Scaled back
Government
Spending↓ Stimulus winds down
Deficit↓ Shrinks as taxes rise
- Economies move in waves around a long-term trend
- Central banks cut rates in downturns and raise them in booms
- Governments spend more when the economy is weak
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