Answer to Question #230289 in Macroeconomics for Goodness

Question

Draw the business cycle and label each phase and stages and explain

Answer 1

• The expansion phase of business cycle shows the increment in the GDP and employment level in the economy till each it reaches the full employment level. Thus, it shows the upward movement in the business cycle. The expansion is followed by the contraction in the economy.
• The contraction phase of business cycle indicates the reduction in GDP as well as reduction in the employment. This creates the involuntary unemployment in the economy on large scale. 
• The peak phase of business cycle indicates the highest level of employment and GDP in the economy. 
• The trough phase of business cycle shows the lowest level of GDP as well as employment level.