Usually, during a business downturn, firms let their inventories decline. As inventories dwindle, businesses eventually use down their inventories to the point where they are short. This, in turn, starts an increase in inventory levels as companies begin to produce more than is sold, leading to an economic expansion.

INVESTMENT BUSINESS CYCLES: The result is relatively large changes in investment expenditures, which triggers the onset of expansions and contractions. A business-cycle expansion generates higher interest rates and a surplus of capital that prompts a decrease in investment and a business-cycle contraction.

Even a small downturn in consumer spending damages the economy. As it drops off, economic growth slows. Prices drop, creating deflation. If slow consumer spending continues, the economy contracts.

The business cycle is caused by the forces of supply and demand—the movement of the gross domestic product GDP—the availability of capital, and expectations about the future. This cycle is generally separated into four distinct segments, expansion, peak, contraction, and trough.

There are basically two important phases in a business cycle that are prosperity and depression. The other phases that are expansion, peak, trough and recovery are intermediary phases.

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GDP per capita only measures the income paid to those residing in the country’s borders. GNI per capita can raise a country’s standard of living. That’s because many citizens live in other countries to get better jobs. They also remit part of their wages back to their families at home.

Yet there is a generally accepted measure for standard of living: average real gross domestic product (GDP) per capita. Let’s break it down piece by piece: GDP measures annual economic output — the total value of new goods and services produced within a country’s borders. Real GDP is the inflation-adjusted value.

There are eight standards, and each one is about an aspect of care that contributes to your safety, health and well-being.