Question

what are the various stages of a business cycle

Answer 1

Please refer to the image below for the solution-

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• Expansion- In this phase the economic activities are fast growing and there is an increase in employment opportunities. Businesses see a positive future and hence invest in the business.
• Peak- This is the maximum expansion point. The growth stops here and the fall begins.
• Recession- In recession, there is a fall in economic activities. Manufacturer reduce production. The economy should reverse here or the future will be worst.
• Depression- This is the worst hit to the economy and can last for 3-5 years. With a major drop in production and demand, the government and the central bank needs to take action to improve the situation.
• Trough- the point at which depression stops and recovery starts is called trough. Things start improving in the economy from this point.
• Recovery- In the recovery phase, the manufacturers and businesses are given loans at low rates to improve the condition. They start investing in businesses and see a positive future.

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