The economic phase

Question

The economic phase with conditions making it easy for consumers to buy homes, cars, and other goods is called (Points : 1)
expansion.
trough.
peak.
contraction.

Answer 1

This phase is called the prosperity phase or economic expansion. There are several reasons why it is easy for consumers to buy. There is a high level of output and trade, which means high employment and higher levels (relative to the past) of income. Banks expand credit in this phase, which means people can borrow to buy large ticket items and pay over time. With inflows of money, businesses expand and make more goods available. People are relatively optimistic, so they will not hoard their capital. The downside is that eventually inflation will occur and interest rates will rise. Those last two will eventually slow the growth.

 

Dorene O.