The business cycle refers to the natural fluctuations in economic activity that occur over time. These fluctuations are characterized by periods of expansion and contraction, with each phase having its own unique characteristics. The four phases of the business cycle are:

1. Expansion: This is the phase of the business cycle where the economy is growing and expanding. During this phase, businesses are hiring more workers, consumer spending is increasing, and economic indicators such as GDP and stock prices are rising. This phase is characterized by high levels of economic activity, low unemployment rates, and increasing consumer confidence.

2. Peak: The peak phase marks the end of the expansion phase and the beginning of the contraction phase. During this phase, economic activity is at its highest point, and the economy is operating at full capacity. However, the growth rate starts to slow down, and economic indicators such as GDP and stock prices start to level off.

3. Contraction: The contraction phase is also known as the recession phase. During this phase, economic activity starts to decline, and businesses start laying off workers. Consumer spending decreases, and economic indicators such as GDP and stock prices start to fall. This phase is characterized by high levels of unemployment, low consumer confidence, and declining economic activity.

4. Trough: The trough phase marks the end of the contraction phase and the beginning of the expansion phase. During this phase, economic activity reaches its lowest point, and the economy is operating at its lowest capacity. However, the growth rate starts to pick up, and economic indicators such as GDP and stock prices start to rise. This phase is characterized by low levels of economic activity, high unemployment rates, and low consumer confidence.