Identifying Business Cycle Phases

Easy Economic Analysis Business Cycle Analysis

In the context of business cycle analysis, understanding the different phases of the economic cycle is crucial for making informed investment decisions. A portfolio manager is evaluating the current economic conditions and recognizes the signs of an impending downturn. The manager recalls the typical characteristics of a business cycle.

Which of the following statements best describes the phase of the business cycle characterized by declining economic activity, decreasing consumer spending, and increasing unemployment rates?

Expansion phase, where economic activity is increasing and consumer spending is high.

Contraction phase, marked by a decline in economic activity and rising unemployment.

Recovery phase, characterized by increasing economic activity after a downturn.

Hint

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