ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Expansion is the phase of the business cycle where real gross domestic product (GDP) grows for two or more consecutive quarters, moving from a trough to a peak. Expansion is typically accompanied by a rise in employment, consumer confidence, and equity markets and is also referred to as an economic recovery.

Detailed explanation-2: -As an economy grows, businesses and consumers spend more money on goods and services. In the growth stage of an economic cycle, demand typically outstrips the supply of goods, and producers can raise their prices. As a result, the rate of inflation increases. Inflation is a sustained rise in overall price levels.

Detailed explanation-3: -Unemployment, inflation and economic growth tend to change cyclically over time. The four phases of the business cycle: 1. A peak is when business activity reaches a temporary maximum, unemployment is low, inflation high.

Detailed explanation-4: -Since the growth rate of the price level is just another term for the inflation rate, the inflation rate must fall. An increase in the rate of economic growth means more goods for money to “chase, ” which puts downward pressure on the inflation rate.