Peak (Business Cycle)

View FREE Lessons!

Definition of Peak:

The peak of a business cycle is the highest point in a business cycle and marks an economy’s transition from an expansion to a recession. 

Detailed Explanation:

A business cycle is the upward and downward movements of economic output over time. It has four phases. An economy is expanding when its output is increasing. Eventually, an expansion reaches its peak, where the expansion ends, and output begins to decrease. The economy has entered a recession or contraction. Usually, growth begins to slow late in an expansion, and inflation begins. Companies are near or exceed their capacity. Unemployment is low, but hiring has begun to slow. Economists sometimes refer to the economy as being “tired.” The output begins to slow. A peak is reached when the economy’s output stabilizes, just before declining and begins a recession. Eventually, the recession ends at a trough.

The graph illustrates two business cycles. Output is measured using the economy’s gross domestic product after being adjusted for inflation. Time appears on the horizontal axis.

Dig Deeper With These Free Lessons:

Business Cycles
Fiscal Policy – Managing an Economy by Taxing and Spending
Gross Domestic Product – Measuring an Economy's Performance
Monetary Policy – The Power of an Interest Rate

Search the Glossary

Investment Calculator:

Market Overview:

Market quotes are powered by

Single Quote:

© Higher Rock Education and Learning, Inc. All rights reserved. No portion of this site may be copied or distributed by any means, including electronic distribution without the express written consent of Higher Rock Education and Learning, Inc.