CA Foundation · Business Economics · Business Cycles
Which statement about the recovery (revival) phase of a business cycle is correct?
In the recovery phase, output and employment begin rising from the trough and business confidence improves. Demand picks up and firms start expanding production and investment. Maximum output marks the peak, while falling demand and layoffs belong to contraction.
- AOutput and employment start rising from the trough, and business confidence begins to improveCorrect
- BOutput reaches its maximum and inflation is at its highest
- CAggregate demand falls sharply and firms lay off workers
- DUnemployment is at its highest level and output is still declining
Explanation
Recovery begins after the trough: demand picks up, firms increase production and hiring, and optimism returns. Maximum output marks the peak. Falling demand and layoffs belong to contraction, and declining output at highest unemployment describes the trough or contraction.
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