What are the phases of the business cycle?

• A. Expansion, Peak, Recession, Recovery
• B. Expansion, Peak, Contraction (Recession), Trough
• C. Boom, Expansion, Recession, Stabilization
• D. Recovery, Peak, Decline, Bottom

Answer: (B)

Verified step by step guidance

1. Step 1: Understand that the business cycle represents the fluctuations in economic activity over time, typically measured by changes in real GDP and other macroeconomic indicators.
2. Step 2: Identify the main phases of the business cycle, which describe the economy's movement through periods of growth and decline.
3. Step 3: Recognize that the four standard phases are: Expansion (a period of increasing economic activity), Peak (the highest point of economic activity before a downturn), Contraction or Recession (a period of declining economic activity), and Trough (the lowest point before recovery begins).
4. Step 4: Compare the given options to these standard phases to determine which set correctly lists the phases of the business cycle.
5. Step 5: Conclude that the correct sequence is Expansion, Peak, Contraction (Recession), and Trough, as it accurately reflects the typical progression of the business cycle.