The Business Cycle
The economy's recurring sequence of expansion, peak, contraction, and trough; a recession is commonly defined as two or more consecutive quarters of declining GDP.
The classic item gives a scenario — “GDP has declined for two straight quarters, unemployment is rising” — and asks for the phase or the best sector. The tell is the direction of output and jobs together: both rising means expansion, both falling means contraction. A depression is just a severe, prolonged contraction. Sector rotation is the highest-yield trap, and inflation is the second cue — prices typically run hottest near the peak, so a “high inflation” stem points to a late-expansion phase, not the trough.
Do not confuse the cycle with the tools used to manage it: the cycle is what happens, while monetary policy (the Fed) and fiscal policy (Congress and the President) are the responses — a “who acts” stem is testing those, not this term. Equally, don’t mix it up with economic indicators, the statistics (leading, coincident, lagging) that locate where you sit. Memory hook: EPCT — Expansion, Peak, Contraction, Trough — runs the cycle in order.
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