How are cyclical factors characterized in economics?

Cyclical factors in economics are characterized by fluctuations that correlate with the business cycle. This means that these factors rise and fall in conjunction with the economic expansion and contraction phases. During periods of economic growth, cyclical factors such as consumer spending, business investment, and employment levels typically increase. Conversely, during economic downturns, these factors tend to decrease as businesses cut back on investment and consumers reduce spending.

Understanding cyclical factors is critical for analyzing the performance of the economy as they provide insights into the current economic conditions and are valuable for policymakers and businesses when making decisions. These fluctuations differentiate cyclical factors from other economic influences, such as structural factors, which are more constant or long-term in nature, and thus do not change with varying levels of economic activity.