Business CycleThe recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of the business cycle are growth (expansion), peak, recession (contraction), trough and recovery. At one time, business cycles were thought to be extremely regular, with predictable durations. But today business cycles are widely known to be irregular - varying in frequency, magnitude and duration.Since the Second World War, most business cycles have lasted three to five years from peak to peak. The average duration of an expansion is 44.8 months and the average duration of a recession is 11 months. As a comparison, the Great Depression - which saw a decline in economic activity from 1929 to 1933 - lasted 43 months from peak to trough.

Keynesian EconomicsAn economic theory stating that active government intervention in the marketplace and mo
neta
ry policy is the best method of ensuring economic growth and stability.A supporter of Keynesian economics believes it is the government's job to smooth out the bumps in business cycles. Intervention would come in the form of government spending and tax breaks in order to stimulate the economy, and government spending cuts and tax hikes in good times, in order to curb inflation.

Government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates, and government spending, in an effort to control the economy.Since the 1980s, most Western Countries have held a "tight" policy, limiting public expenditure.

The actions of a central bank, currency board, or other regulatory committee, that determine the size and rate of growth of the money supply, which in turn affects interest rates.In the United States, the Federal Reserve is in charge of monetary policy.

In economics, diminishing returns is the short form of diminishing marginal returns. In a production system, having fixed and variable inputs, keeping the fixed inputs constant, as more of a variable input is applied, each additional unit of input yields less and less additional output. This concept is also known as the law of increasing opportunity cost or the law of diminishing returns.

The concept of diminishing returns can be traced back to the concerns of early economists such as Thomas Malthus and David Ricardo. Both men, who lived in 19th century England, were worried that land, a factor of production in limited supply, would lead to diminishing returns. In order to increase output from agriculture, farmers would have to farm less fertile land or farm existing land with more intensive production methods. In both cases, the returns from agriculture would diminish over time, causing Malthus and Ricardo to predict population would outstrip the capacity of land to produce, causing a Malthusian catastrophe.

Returns to scale refers to a technical property of production that predicts what happens to output if the quantity of all input factors is increased by some amount. If output increases by that same amount there are constant returns to scale (CRTS), sometimes referred to simply as returns to scale. If output increases by less than that amount, there are decreasing returns to scale. If output increases by more than that amount, there are increasing returns to scale.