3.7 - The Phases of the Business Cycle

Question 1

What are the 4 phases of the business cycle?

Answer 1

The 4 phases of the business cycle are:
- Peak
- Trough
- Expansion
- Contraction

Question 2

What is a peak in the business cycle?

Answer 2

A peak is the highest point of a business, where demand is high, and when the business is performing at or above standard.

Question 3

What are the key features in a business’ peak (WBSCU)?

Answer 3

Key features of a peak:
- Wages & salaries are highest
- Business is operating at full capacity
- Sales and profits are highest
- Consumer spending is highest
- Unemployment is low

Question 4

What is a trough in the business cycle?

Answer 4

A trough is the lowest point of a business, where demand is low, and when the business is performing below standard.

Question 5

What are the key features in a business’ trough (WBSCU)?

Answer 5

Key features of a trough:
- Wages & salaries are lowest
- Business is operating below full capacity
- Sales and profits are lowest
- Consumer spending is lowest
- Unemployment is highest

Question 6

What is an expansion in the business cycle?

Answer 6

An expansion is the term for an upswing of a business cycle towards a peak. It is called an Economic Expansion.

Question 7

What are the key features in a business’ expansion (PWCU)?

Answer 7

Key features in an expansion:
- Increase in production/output
- Increase in wages
- Increase in consumer spending
- Decrease in unemployment

Question 8

What is a contraction in the business cycle?

Answer 8

An expansion is the term for a downswing of a business cycle towards a trough. It is called an Economic Contraction.

Question 9

What are the key features in a business’ contraction (PWCU)?

Answer 9

Key features in a contraction:
- Decrease in production/output
- Decrease in wages
- Decrease in consumer spending
- Increase in unemployment