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Difficulty: EasyEconomic Indicators and Business Cycle Phases

Place the four phases of the standard macroeconomic business cycle in chronological order, beginning with the growth phase following an economic recovery and continuing through to the cycle's final bottom point.

  1. 1Expansion (Economic growth characterized by rising GDP and consumer demand)
  2. 2Peak (The climax of economic expansion where GDP reaches its upper limit)
  3. 3Contraction (Economic decline marked by falling production and rising unemployment)
  4. 4Trough (The lowest point of economic decline before recovery begins)

Answer

The correct chronological order of the business cycle phases is Expansion, Peak, Contraction, and Trough.
The business cycle moves sequentially through four distinct phases: Expansion (rising GDP and growth), Peak (the height of growth), Contraction (falling GDP and decline), and Trough (the lowest point of economic activity).

Step-by-Step Solution

1
Identify the starting growth phase after an economic low point.
Expansion begins as economic output, employment, and gross domestic product (GDP) increase.
A business cycle begins its expansionary trend following a recovery.
2
Determine the highest point of economic output following expansion.
The Peak represents the maximum upper boundary of economic expansion.
An economic expansion terminates at the peak before contracting.
3
Identify the period of economic downturn following the peak.
Contraction follows the peak, characterized by shrinking GDP and rising unemployment.
Economic activity slows down and declines after reaching the peak.
4
Identify the lowest point of the economic downturn.
The Trough marks the bottom of the contraction phase.
The trough is the transition point where economic decline ends and a new expansion begins.

Key Concept

Business Cycle Progression
Estimated Time:45s
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Topics

Economic Indicators and Business Cycle Phases

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