Trough. The lowest point of real GDP reached during the business cycle is known as the trough. Troughs can be for varying amounts of time.
What do we call a period of growing economic activity?
Over time, economic activity tends to fluctuate between periods of increasing economic activity, known as economic expansions and periods of decreasing economic activity, known as recessions. The economy’s movement through these alternating periods of growth and contraction is known as the business cycle.
When does the peak phase of the economic cycle occur?
The peak phase occurs when the economy has reached its maximum productive output, signalling the end of the expansion. After this point, once employment numbers and housing starts begin to decline, a contractionary phase begins.
What are the four stages of the economic cycle?
The four stages of the economic cycle are also referred to as the business cycle. These four stages are expansion, peak, contraction, and trough. During the expansion phase, the economy experiences relatively rapid growth, interest rates tend to be low, production increases, and inflationary pressures build.
What stage is the economy in?
Stages of the Economy. Economic cycles are identified as having four distinct economic stages: expansion, peak, contraction, and trough. An expansion is characterized by increasing employment, economic growth, and upward pressure on prices.
When does the expansion phase of an economy end?
During the expansion phase, an economy will experience strong growth, and interest rates will generally be lower but will begin to increase as the expansion matures. The overall production level increases, and inflation rates begin to rise as the expansion matures. The peak is reached when the growth of an economy reaches a plateau or maximum rate.
