Which of the following best describes the "peak" phase of the business cycle?
A. When the economy has zero unemployment
B. When the GDP reaches its highest point before starting to decline
C. When inflation is completely gone
D. When government spending is at its lowest
Answer (1)
The correct answer is letter B. The peak phase is when real GDP hits its highest point before the economy begins to contract. This is often followed by a slowdown in production, rising unemployment, and reduced consumer spending. For example, in the Philippines, the economy was at a peak before the COVID-19 pandemic hit in 2020 and caused a sharp recession.
