Topic

Business Cycles, Unemployment, and Inflation

Instructions

Read pages 592-594 of Economics.

Consider the following as you read:

What are primary phases of the business cycle?
How does inflation affect the economy’s level of real output?

Answer preview

The four main phases of business cycle include peak, expansion, contraction and trough. Notably, the expansion phase is defined as the speedup the in the economic activity explained by low unemployment, high growth, and increasing prices. It is the time marked from trough to peak. The second phase of business cycle is the peak which is the top turning of a business cycle. It is at this point where expansion changes into contraction. The third phase of the business cycle is the contraction which is characterized by reduced pace in the economic activity. It is defined by stagnant or low growth, declining prices and high unemployment.

Word count: 243