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Explain the various phases of the business cycles. What does each phase imply? (250 words answer).

Explain the various phases of the business cycles. What does each phase imply? (250 words answer).

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Expert Solution

The various phases of business cycle are: expansion,peak, contraction, trough

Expansion :- it is a phase in which business expands for a prolonged period of time. The movement from trough to peak is noticed. A rise in employment is also seen. It is also referred to as economic recovery because economy comes round a declining economy.

Peak:- it is the highest point in the business cycle where increase in employment, economic growth , rising prices is seen. Maximum output and full or more than full employment is seen. It is the point before the market enters contraction.

Contraction :- this phase produces a scene of decline in the economy. It is characterized by decline in industrial production, income , sales, and puts a dent in the economy. This is generally seen after a peak and before the trough.

Trough:- this phase is indicative of the fact that economy has started to heal. The GDP stops falling and starts increasing. The business cycle ends with this phase.

Rahul Sunny answered 2 years ago
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