ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the peak.
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the trough.
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the contractionary phase.
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None of the above
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Detailed explanation-1: -The peak of the cycle refers to the last month before several key economic indicators, such as employment and new housing starts, begin to fall. It is at this point real GDP spending in an economy is at its highest level.
Detailed explanation-2: -At time t 1 in Figure 5.1 “Phases of the Business Cycle”, an expansion ends and real GDP turns downward. The point at which an expansion ends and a recession begins is called the peak of the business cycle. Real GDP then falls during a period of recession.
Detailed explanation-3: -A recession can be defined as a sustained period of weak or negative growth in real GDP (output) that is accompanied by a significant rise in the unemployment rate. Many other indicators of economic activity are also weak during a recession.
Detailed explanation-4: -The peak phase occurs when the economy reaches its maximum productive output, signaling the end of the expansion. After that point, employment numbers and housing starts begin to decline, leading to a contractionary phase.