Up Learn – A Level economics (aqa) – The Business Cycle

The Business Cycle

The business cycle diagram represents an economy’s transition from boom, to slump, to recession, and back again.


A*/A guaranteed or your money back

Yes, really. Find out more about our A*/A Guarantee below.

More information

Want to see the whole course?

No payment info required!

Up Learn – A Level economics (aqa)

The Business Cycle & Policies

In the last video we saw how virtually all economies in the last century have fallen into a cycle of wonderful, economic boom – followed by crushing, economic bust. 

We call this the business cycle (or trade cycle) and we can see it in action graphically. 

On the vertical axis we have real GDP, and on the horizontal we have time.

When an economy’s growing, real GDP will increase…and increase…

Until we reach a boom! The economy’s buzzing with activity: animal spirits are at an all-time high, consumers are spending merrily and workers are kept busy in employment. 

But as we’ve seen historically, this boom doesn’t last long…

And soon real GDP will slump back down till we reach a bust. Animal spirits are miserably low, consumers are saving and worried about the future, and workers find themselves in unemployment.

And then the cycle repeats…

Real GDP recovers, increasing once again into a boom and then slumps back down into bust. 

And with our business cycle now sketched out…we can break it up into 4 sections!

First we’ve got our boom, then we’ve got our bust (also known as a recession))…

But in between boom and bust (or recession) we’ve got a slowdown, or slump…where real GDP starts to decrease…

And then we’ve from bust (or recession) back to boom, we’ve got the recovery – where the economy recovers, and real GDP starts to rise back towards boom.

So, in summary, the business cycle (or trade cycle) looks like:

The business (or trade cycle) looks like this…economic boom, then slump (or slowdown), then bust (or recession)…then a recovery…which takes us back to boom for the cycle to continue!


Every course includes


Interactive Video Lessons

Video content that keeps you engaged and regular activities that keep you from losing focus


Detailed Quizzes

Technical, Memorisation and Mastery quizzes gradually build up your knowledge and understanding


Exclusive Practice Papers

Written by real examiners exclusively for Up Learn in order to give you additional confidence when preparing for exams


Progress Tracker to A*

Bespoke assessment and practice questions to chart your grade gains as you progress