Looking at past economic fluctuations, corporate activity is seen to have amplified cyclical fluctuations in some instances. As economic activity picks up, the emergence of over-optimistic expectations about future growth tends to trigger an excessive level of business fixed investment and inventory investment.
Such a situation may heighten the peak of the business cycle, but it also deepens the trough thereafter as additional adjustment is needed to compensate for the overshooting. However, these kinds of large swings in the business cycle are unlikely to occur in the current economic recovery, owing to the cautious behavior of firms.