Final answer:
The contraction phase of the business cycle marks a period of economic downturn, starting after a peak and continuing until a trough. It's not possible to confirm if the economy is in this phase without current data. Contractionary fiscal policy implemented during a boom but taking effect during a recession could worsen the downturn.
Step-by-step explanation:
Whether our economy is currently in the contraction phase of the business cycle cannot be universally determined without specific economic data relative to the current period. The contraction phase, as described by the National Bureau of Economic Research (NBER), begins after the economy hits a peak and continues until it reaches a trough. This signifies a period of economic downturn or recession, where there is typically a decline in general economic activity. When asking what would happen if contractionary fiscal policy were employed during an economic boom but didn't take effect until the economy entered a recession, the impact would likely be detrimental. Such timing would exacerbate the recession by further slowing down economic activity at a time when expansionary policies would be more appropriate to stimulate growth.