Final answer:
The answer explains the four phases of the business cycle and describes situations during a contraction in the economy.
Explanation:
The Four Phases of the Business Cycle
- Expansion: Characterized by increasing employment, economic growth, and upward pressure on prices.
- Peak: Economy producing at maximum output, full employment, and inflationary pressures.
- Contraction: Growth slows, unemployment rises, and pricing pressures subside.
- Trough: Economy hits a bottom before the next phase of expansion.
During a contraction, the economy experiences reduced consumer spending, layoffs, and decreased business profits, leading to a decrease in production and investment.
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