business cycle

Period of time that includes a peak and trough of economic activity, as measured by a country's national income. The economy passes through phases of boom and recession, causing changes in the levels of output, unemployment, and inflation.

In Keynesian economics, one of the main roles of the government is to smooth out the peaks and troughs of the business cycle by intervening in the economy, thus minimizing ‘overheating’ and ‘stagnation’. This is accomplished by regulating interest rates and government spending.