What characterizes the peak phase of the business cycle?

The peak phase of the business cycle is characterized by low unemployment and high productivity. During this phase, the economy reaches its maximum output, and most of the available workforce is employed, which generally leads to increased incomes and consumer spending. High productivity indicates that businesses are operating efficiently and effectively, often resulting from capital investments, technological advances, and overall economic confidence.

Additionally, during the peak, businesses typically experience strong demand for their products and services, which fuels further production and employment. This phase is essential because it sets the stage for potential inflation as demand begins to exceed supply, leading to increased prices. Understanding these dynamics helps in grasping the overall health of the economy during different phases of the business cycle.