What term describes fluctuations in economic activity over time, including phases of expansion and contraction?

The concept that describes fluctuations in economic activity over time, which includes phases of expansion and contraction, is known as business cycles. Business cycles refer to the natural rise and fall of economic growth that occurs over time, typically comprising four distinct phases: expansion, peak, contraction (or recession), and trough. During the expansion phase, the economy grows as measured by increases in GDP, employment rises, and consumer confidence improves. Conversely, a contraction indicates a slowdown in economic activity, often leading to a recession characterized by declines in consumer spending and business investment.

The other terms listed do not capture the dynamic nature of economic fluctuations. Economic equilibrium refers to a situation where supply and demand are balanced, typically not highlighting the cyclical nature of growth and decline. Inflation rates measure the rate at which the general level of prices for goods and services is rising, indicating purchasing power decrease over time, but do not inform about the economic cycles themselves. Market stability relates to the consistency of economic variables over time, often suggesting minimal fluctuations, which contrasts with the very idea of business cycles. Therefore, business cycles is the appropriate term to describe these ongoing fluctuations in economic activity.