Trough (Business Cycle)

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Definition of a Trough:

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

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. Reaching a trough is welcome news because a trough occurs when economic output has bottomed out, and a recovery is beginning. 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.


Generally, contractions coincide with higher unemployment, more business failures, declining sales and profits, and lower prices. 

Dig Deeper With These Free Lessons:

Business Cycles
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Gross Domestic Product – Measuring an Economy's Performance
Monetary Policy – The Power of an Interest Rate

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