Question

The economy of Sutanvia is under severe financial distress. However, over the last few months, the economy has gradually picked up, and employment levels are slowly rising back to normal levels. Consumers are also beginning to engage in regular buying activities. In this scenario, the economy of Sutanvia is currently in the _____ phase of its business cycle.

Answer 1

Answer:

Recovery.

Explanation:

A business cycle is the periods of growth and decline in an economy, the recurrent ups and downs in the level of economic activity.

There are stages:

-Peak phase. real output in the economy is at a high level, unemployment is low, domestic output may be at its capacity, inflation may be high.

-Contraction or recession phase. real output is decreasing, unemployment rate is rising, as contraction continues inflation pressure fades, if the recesion is prolonged price may declain as deflation.

-Trough or depression phase. lowest point of the real GDP, output and unemployment bottom out, this phase may be short lived or prolonged, there is no precise decline in output at which a serious recession becomes a depression.

-Expansion or recovery phase. real output in the economy is increasing, unemployment rate is declining, the upswing part of the cycle, the economy gradually picked up, and employment levels slowly rise back to normal levels, consumers also begin to engage in regular buying activities.