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CMA Foundation · Fundamentals of Business Economics and Management · Economic and Business Environment

During a phase of the business cycle, output and employment are falling, consumer demand is weak and firms are cutting investment, but the trough has not yet been reached. Which phase is this?

This phase is recession, also called contraction, because output, employment, demand and investment are falling and the lowest point, the trough, has not yet been reached. Expansion and recovery feature rising activity, while the peak is only the turning point at the top of the cycle.

  1. AExpansion
  2. BPeak
  3. CRecessionCorrect
  4. DRecovery

Explanation

Declining output, employment and investment before the trough characterise recession (contraction). Expansion and recovery involve rising output, and the peak is the turning point at the top, not a period of ongoing decline.

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