Question

Business cycle fluctuations occur around a long-term growth trend and have four distinct phases: expansion, peak, contraction, and trough. What are the four distinct phases of business cycle fluctuations?

1) Expansion, peak, contraction, trough
2) Expansion, peak, trough, contraction
3) Peak, expansion, contraction, trough
4) Peak, expansion, trough, contraction

Answer 1

The correct order of the business cycle phases is Expansion, Peak, Contraction, and Trough. These phases represent the natural pattern of growth and decline in an economy over time.

Step-by-step explanation:

The four distinct phases of business cycle fluctuations are Expansion, Peak, Contraction, and Trough. These phases describe the pattern of growth and decline in an economy. During the expansion phase, the economy grows and moves towards its peak, which is the highest point before a recession begins. Following the peak, the economy enters the contraction phase where economic activities decrease, resulting in a downturn or recession. Lastly, the economy hits the trough, the lowest point, before beginning to recover.

Understanding the business cycle is important for predicting future economic performance and making informed business and investment decisions. The business cycle's impact is evident in U.S. history, with significant expansions and contractions such as the Great Recession and the COVID-19 pandemic recession.