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The business cycle is a repeated 5-stage sequence of development, stagnation and decline in a free-enterprise financial system. By contrast, some economists, notably New classical economist Robert Lucas , argue that the welfare price of business cycles are very small to negligible, and that governments ought to deal with long-time period development instead of stabilization.

Their fashions present that when the distinction between quick-term interest rates (he makes use of 3-month T-bills) and long-time period interest rates (10-year Treasury bonds) at the end of a federal reserve tightening cycle is adverse or less than ninety three foundation points optimistic that a rise in unemployment normally happens.

The stage of the cycle is identified by fluctuations in gross home product (GDP), production, trade and exercise in the financial sector.