CA Foundation · Business Economics · Business Cycles
Which phase of the business cycle is characterised by the lowest level of economic activity, high unemployment and idle capacity, just before output begins to rise again?
The trough is the phase with the lowest level of economic activity, high unemployment and idle capacity. It is the lower turning point of the business cycle, after which recovery and expansion begin, whereas the peak is the upper turning point where activity is highest.
- APeak
- BTroughCorrect
- CBoom
- DExpansion
Explanation
The trough is the lowest turning point of the cycle, where output and employment bottom out and capacity is underused. After the trough, the economy enters recovery or expansion. The peak is the opposite turning point, where activity is at its highest before a downturn.
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