ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The downswing of the business cycle towards a trough is called an economic contraction. It is associated with: decrease in production/output • increase in unemployment • decrease in wages • decrease in consumer spending.

Detailed explanation-2: -Expansion The first stage in the business cycle is expansion. In this stage, there is an increase in positive economic indicators such as employment, income, output, wages, profits, demand, and supply of goods and services.

Detailed explanation-3: -Definition and Examples of an Economic Contraction An economic contraction happens when domestic output, such as GDP decreases. It leads to a decrease in other areas, such as individual income, production, and sales. Unemployment rates may increase.

Detailed explanation-4: -period of economic growth; unemployment is decreasing and workers are earning high wages. What does contraction during the business cycle show? The economy is shrinking while unemployment is increasing.

Detailed explanation-5: -This phase ends with a peak in economic activity. In a contraction, households demand fewer goods and services, businesses reduce the number of workers they employ and growth in wages and prices slows. This phase ends with a trough in economic activity.