Question

A nation's economy fluctuates instead of growing at a steady pace every year. These fluctuations are generally referred to as the business cycle. Describe the four different phases of the business cycle.

Answer 1

Ans- The four phase of business cycle is expansion, peak , contraction and trough. They can be describe as:

1. Expansion- It is a phase when economy or business is growing. In this phase gross domestic product increase, increase in  employment, decrease in inflation rate and stock market is at bull phase.

2. Peak- In this phase economy reaches at its highest level or we can say its overheating period as growth rate reaches its maximum level, full employment and bubbles in stock market is noticable.During this phase expansion moves to contraction phase.

3. Contraction - In this phase there is correction in economy. The growth of economy slows down, decrease in employment, stock market is in bear phase and recession enters in economy. This phase begins from peak and ends on trough.

4. Trough - This is last phase in which economy hits the bottom during this phase again economy moves to expansion phase from contraction.