The economic cycle refers to the natural fluctuation of economic activity over time, typically consisting of four main phases: expansion, peak, contraction, and trough. During the expansion phase, economic indicators like GDP and employment levels rise, leading to increased consumer spending and business investment. As the economy reaches its peak, growth slows down, eventually leading to a contraction phase where economic activity declines. This can result in higher unemployment and reduced spending. The cycle concludes with a trough, the lowest point, before the economy begins to recover and enter another expansion phase.