What stage follows an economic expansion in the business cycle?

Following an economic expansion in the business cycle, the stage that typically comes next is referred to as the peak. This peak represents the point at which the economy has reached its highest level of activity before the next downturn begins. During this stage, indicators such as GDP growth, employment, and production are at their highest levels.

It is important to recognize that after the peak, the economy does not remain in that state indefinitely. Instead, it transitions into the contraction phase, where economic activity begins to decline. The peak is essentially the transition point that signals the end of expansion and the start of this downturn. Understanding this sequence is crucial for grasping the dynamics of economic cycles and how they influence investment strategies and decision-making.

In the broader context of the business cycle, following the peak, the economy typically goes through a contraction, which is a decrease in economic activity that leads to a recession if it is prolonged. Therefore, the peak is a critical point in the cycle, as it signifies the highest levels of economic performance before the subsequent decline.