The trend path of output is the smooth path of long-run output once its short-term fluctuations are averaged out.

The business cycle is the short-term fluctuation of total output around its trend path.

The output gap is the deviation of actual output from potential output.

A political business cycle arises if politicians manipulate the economy for electoral advantage.

The accelerator model of investment assumes that firms guess future output and profits by extrapolating past output growth. Constant output growth leads to a constant level of investment. It takes accelerating output growth to raise desired investment.

Real business cycle theories explain cycles as fluctuations in potential output itself.