This article is about a particular stage in a business cycle. For a discussion of longer-term increases in a country's economic activity, see Economic growth.
An economic expansion is an upturn in the level of economic activity and of the goods and services available. It is a finite period of growth, often measured by a rise in real GDP, that marks a reversal from a previous period, for example, while recovering from a recession.[1][2] The explanation of fluctuations in aggregate economic activity between expansions and contractions ("booms" and "busts" within the "business cycle") is one of the primary concerns of macroeconomics.[3]
Definition
According to the four stages of a business cycle (expansion, peak, contraction, trough), an expansion is an upward trend when a country's economy experiences relatively rapid growth as measured by a rise in industrial production, employment, consumer spending, and utilization of resources.[4][5] Whereas a recession is defined as two consecutive quarters of decline in GDP,[6]economic recovery and prosperity are two successive phases of expansion.
Economic expansion can be affected by external factors such as technological changes or weather conditions,[7] or by internal factors such as a country's fiscal policy,[8]monetary policy, regulatory policy,[9]interest rates, the availability of credit, or other impacts on producer incentives. Global events, such as pandemics, may also influence the amount of economic activity in various countries.[10][11]
Economic expansion and contraction refer to the overall output of all goods and services, while the terms "inflation" and "deflation" refer to rising and falling prices of commodities, goods and services in relation to the value of money.[4]
From a microeconomic standpoint, expansion usually means enlarging the scale of a single company or firm. This can be achieved through internal actions—opening branches, finding new customers, inventing products, developing lines of business—and through integration, for example, taking over or merging with other companies.[12]
^Compare:Lederer, Emil (May 1939). "Is the Economic Frontier Closed?". Social Research. 6 (2). New York: 154–155. JSTOR40981818. I would define economic expansion as the increase of aggregate production from one production period to another. If the concept is defined in this general way it includes expansion that results from an increase in population, from better utilization [...].
^Ryan, Cillian; Mullineux, Andrew W. (1997). "The ups and downs of modern business cycle theory". In Snowdon, Brian; Vane, Howard R.; Backhouse, Roger E. (eds.). Reflections on the Development of Modern Macroeconomics. Cheltenham: Edward Elgar Publishing. p. 136. ISBN978-1781008492. Retrieved 22 May 2023. [...] the primary focus of macroeconomics swung back from determining and manipulating the equilibrium level of output to the 'business cycle'.
