Wk3 DQs.docx - 1.a Identify and define the four phases of...

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1.a) Identify and define the four phases of the business cycle. How does the National Bureau of Economic Research (NBER) define a recession? See the NBER's website at . Expansion is the first stage of the business cycle and a symptom of a thriving economy. This stage is great at first because everyone has higher income. With the higher income, comes higher demand for goods and services, and the demand begins to be larger than the supply. The result leads to inflation, which increases prices for goods and services. The stage that follows expansion is the prosperity stage. At this stage, the economy is at its peak when it comes to employment. Unemployment is not an issue. Goods keep on growing in supply, so this growth satisfies consumer demand almost completely. GDP during this stage is at a high almost through the entire length of this stage. Contraction is the third stage right before the final stage. This stage is where the economy isn’t as great as it was anymore. Businesses begin to layoff employees and do other things just to decrease costs. Demand for goods and services is at the beginning stage of decreasing. The final stage is recession. Recession is the time that demand for goods and services declines drastically. GDP is at an all time low, unlike unemployment which would most likely be at an all time high.
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