Which of the following are the phases of the business cycle?

The correct response identifies the primary phases of the business cycle, which are expansion, peak, contraction, and trough. During an expansion, the economy experiences growth, characterized by increasing GDP, employment rates, and consumer spending. This growth eventually leads to a peak, where economic activity reaches its highest point before starting to decline.

As the economy transitions into the contraction phase, economic activity begins to decrease, leading to reduced GDP, higher unemployment, and decreasing consumer spending. The contraction continues until the economy reaches a trough, the lowest point in the business cycle, where economic activity slows down considerably. Following this trough, the economy typically starts to recover, leading back into an expansion.

In contrast, the other options present phases that do not accurately reflect the standard business cycle. Growth and high demand, while related to economic conditions, are not formal phases like the recognized peak or trough. Similarly, inflation and deflation pertain to price levels rather than distinct phases of the business cycle. Lastly, terms like poverty, growth, stagnation, and surplus describe economic conditions rather than the cyclical nature of economic expansions and contractions. Understanding these recognized phases helps in analyzing economic trends and making informed decisions in macroeconomic policy and investment strategies.