What are the four phases of the business cycle?

The four phases of the business cycle encompass expansion, peak, contraction, and trough, which are critical for understanding economic fluctuations.

During the expansion phase, economic activity increases, characterized by rising employment, consumer spending, and production. As the economy grows, it reaches the peak phase, where growth hits its maximum potential before beginning to decline. The contraction phase follows, representing a decrease in economic activity marked by falling demand, production, and potentially rising unemployment. Finally, the trough phase indicates the lowest point of economic activity before recovery begins, where the economy can start to rebound and move back into expansion.

This classification captures the dynamic nature of economies and provides essential insights for building strategies in business and economic planning. The other options do not encompass the cyclical nature of economic activity as effectively or refer to different concepts altogether, such as phases of a product lifecycle or project management, rather than the broader economic context dictated by the business cycle.