The economic cycle refers to the natural rise and fall of economic activity over time. It consists of four main phases: expansion, peak, contraction, and trough. During the expansion phase, businesses grow, jobs are created, and consumer spending increases. This leads to a peak, where the economy is performing at its best. After reaching the peak, the economy may enter a contraction phase, where growth slows down, and unemployment rises. This can lead to a trough, the lowest point of the cycle, before the economy begins to recover and start the cycle anew. Understanding the economic cycle helps individuals and businesses make informed decisions.