ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The recession is the stage that follows the peak phase. The demand for goods and services starts declining rapidly and steadily in this phase.

Detailed explanation-2: -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.

Detailed explanation-3: -The boom and bust cycle is a key characteristic of capitalist economies and is sometimes synonymous with the business cycle. During the boom the economy grows, jobs are plentiful and the market brings high returns to investors. In the subsequent bust the economy shrinks, people lose their jobs and investors lose money.

Detailed explanation-4: -If the money supply becomes excessive, people may overinvest and money starts to lose its value. This can lead to a decline in the value of assets. Investors lose money, unemployment rises and the economy enters the bust part of the cycle. A bust is often referred to as a recession.

Detailed explanation-5: -Key Takeaways The business cycle goes through four major phases: expansion, peak, contraction, and trough. All economies go through this cycle, though the length and intensity of each phase varies.