Question

Compare and contrast the phases of the business cycle

Answer 1

Business cycle:

This is the upward and downward movements of GDP in an economy. GDP indicates the growth.

The phases are as below:

#) Expansion: this is the stage where GDP is increasing.

#) Peak: this is the highest point of expansion; beyond which GDP cannot rise.

#) Recession: Once the peak is achieved, GDP starts falling. The declining stage of GDP indicates a recession.

#) Trough: this is the lowest point of recession; beyond which GDP can’t fall.