Economies do not grow smoothly. Output speeds up, slows, and sometimes falls.
Four phases
Expansion
Real GDP rises; jobs are created.
Peak
The highest point before output turns down.
Contraction
Real GDP falls; two quarters in a row is a recession.
Trough
The lowest point, before recovery begins.
The points to remember
- Recession: real GDP falls for two consecutive quarters.
- Slower growth is not a recession: real GDP must actually fall.
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Draw the long-term trend first, then the wave around it.
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Remember it as: Trend straight, GDP wavy; above is inflationary, below is deflationary.
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Paper 2 also gives growth figures and asks you to spot the recession.
Our example (made-up numbers)
| Year | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|
| Real GDP growth (%) | 2.4 | −3.1 | 1.2 | 2.8 |
The points to remember
- Look for negative growth: 2020 here, at −3.1%.
- 2021 has low growth, but positive: output was rising again (recovery).
Paper 2 asked this in November 2025, for 3 marks.
Sketch a business cycle diagram and indicate a period of economic growth and a period of recession on the diagram.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
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Watch the graph build step by step in study mode.
How the 3 marks are given
| Your sketch | Marks |
|---|---|
| Correctly labelled, with a period of growth and a period of recession marked | 3 |
| Both periods marked but a label wrong or missing; or labelled with only one period marked | 2 |
| A cycle with no periods marked; or one period marked and labels wrong | 1 |