ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As the expansion matures, however, the economy can overheat as it reaches peak growth, which is usually evidenced by rising inflationary pressures. From this point, the cycle can turn over for various reasons.

Detailed explanation-2: -Inflation decreases during recessions and increases during expansions (recoveries).

Detailed explanation-3: -In the late cycle, economic activity often reaches its peak. Growth slows but remains positive. Rising inflation and a tight labor market may lead the Federal Reserve to raise interest rates and corporate earnings may decline. The late cycle ends when economic activity contracts and the economy enters recession.

Detailed explanation-4: -Peak. The peak phase follows the expansion in a business cycle. The peak of the business cycle is the instance right before key economic indicators start to fall. At this time, prices are at their highest, and the economy can “overheat, ” meaning businesses can no longer satisfy consumer demands.

Detailed explanation-5: -In the expansionary phase, the economy experiences growth over two or more consecutive quarters. Interest rates are typically lower, employment rates rise, and consumer confidence strengthens. The peak phase occurs when the economy reaches its maximum productive output, signaling the end of the expansion.