Gross Domestic Product (GDP) refers to the market value of all final goods and services that are produced in a country in a given period of time. The term, business cycle, is used to describe periods of expansions of economic activity, followed by recessions, contractions and revivals. In an economy, if all the resources are fully utilized, then the economy is said to be producing at its potential GDP. When the actual GDP of an economy differs from its potential GDP, a GDP gap is created. The movement of the actual GDP across the potential GDP is given by business cycle. Graphically, the phases of the business cycle are denoted in terms of real GDP on the y-axis and time on the x-axis. Along with the GDP, the business cycle gives a good indication about the state of an economy. The factors influencing the business cycle are the levels of business investment, expectations among the public about the future, availability of money and changes in the world economy. Information from the business cycle can be used while making decisions. The Real Business Cycle theory is used while making a decision about a large purchase. The business cycle anticipates the direction of the economy with the help of leading indicators, which may be technological shocks. These are random fluctuations in the level of productivity that shift the constant growth trend upward or downward. The business cycle facilitates decision making with the help of these indicators given by it.
Gross Domestic Product (GDP) refers to the market value of all final goods and services that are produced in a country in a given period of time. The term, busine