What are the phases of the business cycle?

The phases of the business cycle refer to the fluctuations in economic activity that an economy experiences over time. The correct answer outlines these phases as expansion, peak, contraction, and trough.

Expansion is the phase where the economy is growing, characterized by increases in production, employment, and consumer spending. This upward trend continues until it reaches a peak, which is the highest point of economic activity in the cycle. After the peak, the economy enters the contraction phase, marked by a decline in economic activity, leading to decreased spending and higher unemployment rates. The trough is the lowest point of the cycle, indicating the end of the contraction period before the economy begins to recover and enter another expansion phase.

These phases are critical for understanding macroeconomic dynamics and for policymakers who aim to manage economic fluctuations. They provide a framework for analyzing economic data and forecasting future economic activity. The other choices do not correctly represent the widely accepted phases of the business cycle, as they focus on different concepts or aspects of economics that are not directly related to the cyclical nature of economic activity.