This chapter begins our study of short-term fluctuations in economic activity, commonly known as business cycles. We will start with some background on the history and characteristics of these economic ups and downs, and place the current recession in context. We next develop concepts that allow us to measure the severity of business cycles. These concepts allow us to analyze short-run economic activity from different perspectives, and to link fluctuations in output to changes in unemployment. Finally, we introduce a verbal description of a basic model of booms and recessions. This will set the stage for the formal analysis we will develop in the chapters that follow. Throughout this chapter (and those that follow), we will connect the data we examine and the theories we develop to the recession that began in late 2007.