Exercise 1.
Write a brief description, based on what you see in the charts above, of the following phases of the business cycle:
Trough:
Expansion:
Peak:
Recession:
Exercise 2.
Review the information on the business cycle, then complete the chart below describing conditions in the phase of the business cycle. For example, "Housing Construction." What happens to housing construction during an expansion? Does it increase or decline? That's what you need to describe. Note: these should be descriptions, not one word answers.
Explanation of Four Phases of Business Cycle
Prosperity Phase: When there is an expansion of output, income, employment, prices and profits, there is also a rise in the standard of living. This period is termed as 'prosperity phase'.
The features of prosperity are:
High level of output and trade.
High level of effective demand.
High level of income and employment
Rising Interest rates.
Inflation
Large expansion of bank credit.
Overall business optimism.
A high level of MEC (Marginal Efficiency of Capital) and investment.