A business cycle Basically, a business cycle refers to a progression of economic activities found within a state’s economy which are classically characterized through four phases namely recession, growth, decline and recovery that reiterate over time. However, economists note that comprehensive business cycles tend to fluctuate in lengths (Knoop, pp. 12). This implies that the durations of the business cycles might fall within a time span of virtually two to about twelve-years with nearly all cycles averaging almost six years in extent. Actually, the phrase ‘business cycle’ is primarily correlated to larger national, industry- wide and regional business trends. Major economic variables used in defining business cycles Heightened research on what caused the business cycles led to the determination of various factors that primarily shaped the disposition and direction of regional, industry, and national specific economies. The distinguished key variables that were used in defining the business cycles included investment spending, governments spending, as well as imports and exports fluctuations. The variation in the investment spending volatility was actually deemed to be amongst the most essential business cycles factors. For instance, in the United States business cycles, investment spending was proved to be a persistently volatile factor of the total or aggregate demand (Knoop, pp.11). It tends to vary more from period to period as compared to the largest aggregate demand component known as the consumption expenditure. Fluctuation in government spending is yet another factor that caused business cycles fluctuations. Being widely considered as a stabilizing economic force rather than the basis for economic instability or fluctuations, variations in government spending can significantly impact the business cycles. Finally, an economy’s imports and exports fluctuations can also cause eminent disturbances in the business cycle because the net export constitutes an economy’s aggregate demand. Characteristics of recession based on key economic variables In the business cycles, a recession is usually characterized by declining trends in economic activities. The aggregate demands are perceived to be very low and this is attributable to the fluctuations in the key economic variables namely the net exports, government spending, and investment spending. Basically, the investment spending volatility is a key factor that has for long dictated the US business cycles. In fact, during the periods when an economy is in a recession, the investment levels are seen to have declined. For instance, the 1929 great depression was a result of the collapse in investment spending which saw a decline in the aggregate demand. The deceleration in the investment during the recession periods further causes a downward response in the sales trends (Knoop, pp.106). When an economy is in a recession, investment spending is seen to decline hence causing the overall output to decline. Conversely, during World War II for example, increased government spending resulted in the expansion of economic activities. However, the recession periods that came afterwards, between 1953 and 1954 was evidently attributabl