SIE practice questioneasyBusiness Cycle Phases
Which of the following is the correct order of the four phases of the business cycle?
- APeak, expansion, trough, contraction
- BExpansion, peak, contraction, trough✓ Correct answer
- CTrough, contraction, peak, expansion
- DContraction, expansion, peak, trough
Explanation
Why B — Expansion, peak, contraction, trough
The business cycle follows a repeating pattern: Expansion (economic growth, rising GDP, falling unemployment), Peak (the high point where growth slows), Contraction (declining economic activity, rising unemployment), and Trough (the low point before the next expansion). A recession is defined as two consecutive quarters of declining GDP, occurring during the contraction phase.
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