BUSINESS CYCLE
Peak
- It is the highest point of real GDP. This is where we have the greatest spending and lowest unemployment. In this phase, inflation is a problem.
Expansion
- This is where real GDP is increasing, spending increases and unemployment decreases.
Contraction/Recession
- This is where real GDP declines for 6 months. This is also where we have increased unemployment and decline in spending.
Trough
- This is the lowest point of real GDP. It has the highest unemployment and the least spending.
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