An economic expansion is an upturn in the level of
economic activity and of the
goods and services
Goods are items that are usually (but not always) tangible, such as pens or Apple, apples. Services are activities provided by other people, such as teachers or barbers. Taken together, it is the Production (economics), production, distributio ...
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. 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
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study topics such as output (econ ...
.
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.
Whereas a recession is defined as two consecutive quarters of decline in
GDP,
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, or by internal factors such as a country's
fiscal policy
In economics and political science, fiscal policy is the use of government revenue collection ( taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variab ...
,
monetary policy,
regulatory policy,
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...
s, 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.
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.
From a
microeconomic standpoint, expansion usually means enlarging the scale of a single
company
A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...
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.
References
External links
"US Business Cycle Expansions and Contractions", National Bureau of Economic Research
{{Authority control
Business cycle
Expansion
Market trends