Examkin

Question

Difficulty: EasyEconomic Indicators and Business Cycle Phases

Economic activity moves through sequential stages over time, known as the business cycle. Beginning with a period of economic growth, in what chronological order do the four main phases of a standard business cycle occur?

  1. 1Expansion
  2. 2Peak
  3. 3Contraction
  4. 4Trough

Answer

The correct chronological sequence of business cycle phases starting from economic growth is Expansion, Peak, Contraction, and Trough.
A standard business cycle moves continuously through four sequential phases: Expansion (growth phase), Peak (maximum output), Contraction/Recession (period of decline), and Trough (lowest point prior to recovery). Starting from economic growth, the correct sequence must move from Expansion to Peak, then into Contraction, and finally reach Trough.

Step-by-Step Solution

1
Identify the growth phase
Expansion is identified as the starting point of growth.
Economic cycles begin with expansion, characterized by rising employment and growing GDP.
2
Determine the highest point of economic activity
Peak follows expansion.
As expansion reaches its limit and growth rate maximizes, the economy enters the peak phase.
3
Identify the period of economic decline
Contraction follows peak.
After passing the peak, output drops and unemployment rises during the contraction phase.
4
Identify the bottoming-out point
Trough follows contraction.
The economic decline hits its lowest point at the trough before economic recovery begins anew.

Key Concept

Chronological progression of business cycle phases
Rate this question

Topics

Economic Indicators and Business Cycle Phases

More questions from this topic