What are the four phases of the business cycle?

The four phases of the business cycle are accurately identified as expansion, peak, trough, and recovery.

During the expansion phase, the economy experiences growth, characterized by increasing economic activity, rising employment levels, and higher consumer spending. This phase leads to the peak, which represents the highest point of economic activity in the cycle before a downturn begins. Following the peak, the economy may enter a trough, marking a period of decline where economic activity slows down significantly, and indicators such as GDP, employment, and spending drop. Lastly, recovery is the phase that follows the trough as the economy starts to grow again, with improving conditions and a gradual return to a state of expansion.

Understanding this sequence is crucial for businesses and policymakers to make informed decisions based on where the economy currently stands within the cycle. The other options presented do not accurately reflect the established phases of the business cycle, which could lead to confusion about economic trends and indicators.