ECONOMICS (CBSE/UGC NET)

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: -An economic peak is like a mountain summit. Once the economy reaches this peak, it must come down. This economic peak is the highest point of economic growth and output, resulting in an increase in the GDP. However, economic peaks often cause upward inflationary pressure and devaluation of the currency.

Detailed explanation-3: -The GDP is highest when the economy is at a peak. The GDP is second-highest in the expansion phase as this is the growing period where the economy tries to reach its peak. The recession comes third in the order because, during a recession, the GDP starts declining and becomes very low.

Detailed explanation-4: -The highest point of the economy, before the recession begins, is called the peak; conversely, the lowest point of a recession, before a recovery begins, is called the trough. Thus, a recession lasts from peak to trough, and an economic upswing runs from trough to peak.

Detailed explanation-5: -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.