What are the four phases of the business cycle?

The four phases of the business cycle are widely recognized as Expansion, Peak, Trough, and Recovery.

In the expansion phase, economic activity increases, leading to growth in production, employment, and consumption. This often drives confidence and investment within the economy. As the economy continues to grow, it reaches the peak phase, where economic activity is at its highest. However, this peak is often followed by a downturn, marking the transition to the trough phase, where economic activity hits its lowest point. This period is characterized by declining activity and rising unemployment. Finally, the cycle moves into the recovery phase, where the economy begins to rebound from the trough, leading back into expansion.

The other options contain elements or terms that partially represent stages of the business cycle, but they do not accurately capture the widely accepted terminology and sequence of the business cycle's phases. For example, terms like "Boom" and "Depression" may represent significant periods of economic activity but do not fit within the established framework of the four key phases. This understanding of the phases aids investors and analysts in making informed decisions regarding economic conditions.