Final answer:
Government interventions like stimulus occur during the Recovery stage of the business cycle. Expansionary fiscal policy is crucial in responding to a recession, aiming to boost aggregate demand. Understanding the business cycle and government roles is vital for economic predictions.
Explanation:
Government interventions, such as stimulus, occur during the Recovery stage of the business cycle. During a recession, when the economy is contracting, the government may implement policies like increasing government spending or cutting taxes to stimulate economic growth and employment.
In response to a recession, expansionary fiscal policy is most appropriate to boost aggregate demand and help the economy recover. This involves increasing government spending or reducing taxes.
Business cycle analysis remains crucial for predicting economic cycles and understanding the role of government intervention in economic stability.
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