Expansion

Definition

Expansion is the phase of the business cycle where economic activity increases, leading to higher output and employment. It is characterized by rising GDP, consumer spending, and investment levels.

5 Must Know Facts For Your Next Test

1. Expansion is marked by a decrease in unemployment rates.
2. During an expansion phase, consumer confidence typically rises.
3. Inflation may begin to increase as demand outstrips supply during expansion.
4. The expansion phase can lead to increased borrowing and lending activity.
5. Central banks might raise interest rates to control inflation during prolonged expansions.

Review Questions

• What are the key indicators of an economic expansion?
• How does consumer behavior change during an expansion phase?
• What role do central banks play in managing an economy during expansion?

Related terms

Recession:

A period of temporary economic decline marked by falling GDP and rising unemployment.

GDP (Gross Domestic Product):

The total value of goods and services produced within a country over a specific period.

Inflation:

The rate at which the general level of prices for goods and services rises, eroding purchasing power.