Dynamic equilibrium in relation to the water cycle refers to the balance between the different processes that occur within the cycle. It is a state where the inputs and outputs of water in the system are equal, resulting in a stable overall water balance. This means that the amount of water entering the system through processes like precipitation and runoff is equal to the amount of water leaving the system through processes like evaporation and transpiration. This balance allows for a continuous circulation of water, ensuring that the water cycle remains in a state of equilibrium.