AP Macroeconomics Flashcards: Business Cycles
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: July 2026
Review key ideas with interactive flashcards. This set includes 14 cards to help you master important concepts.
What fundamental economic shifts cause business cycles?
Business cycles are caused by changes in aggregate supply and/or aggregate demand, which lead to fluctuations in aggregate output and employment.
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What fundamental economic shifts cause business cycles?
Business cycles are caused by changes in aggregate supply and/or aggregate demand, which lead to fluctuations in aggregate output and employment.
What is a business cycle?
A business cycle represents fluctuations in aggregate output and employment that are caused by changes in aggregate supply and/or aggregate demand.
If an economy has just passed a peak, what phase is it now entering?
After passing a peak, an economy enters a recession phase.
What are the two turning points of a business cycle?
The two turning points of a business cycle are the peak and the trough.
What is a recession in the context of the business cycle?
A recession is the phase of the business cycle between a peak and a trough, during which aggregate output and employment decline.
What is the output gap?
The output gap is the difference between an economy's actual output and its potential output.
Define the 'peak' of a business cycle.
A peak is the turning point that marks the end of an expansion phase and the beginning of a recession.
If an economy is at its full-employment output, what does this imply about the output gap?
If an economy is at its full-employment output, its actual output equals its potential output, meaning the output gap is zero.
Define the 'trough' of a business cycle.
A trough is the turning point that marks the end of a recession phase and the beginning of an expansion.
An economy's aggregate output and employment are rising. What phase of the business cycle is it in?
The economy is in an expansion phase.
How do turning points and phases relate to each other in the business cycle?
The turning points (peak and trough) serve as the dividing markers between the two phases (expansion and recession) of the business cycle.
What is another term for potential output?
Another term for potential output is full-employment output.
Define 'potential output'.
Potential output, also called full-employment output, is the level of GDP achieved when the unemployment rate is equal to the natural rate of unemployment.
What are the two main phases of a business cycle?
The two main phases of a business cycle are recession and expansion.