In the expansion phase of a business cycle, the economy moves between which two key turning points?

Introduction / Context:
The business cycle describes short term fluctuations in economic activity around a long run growth trend. It is usually divided into phases such as expansion, peak, contraction and trough. Understanding what happens in each phase is important for interpreting macroeconomic data on GDP, employment and investment. The question asks specifically about the expansion phase and how the economy moves between different turning points during this phase.

Given Data / Assumptions:

• A business cycle has four main stages: expansion, peak, contraction and trough.
• Expansion is a phase of rising economic activity.
• Peak is the highest point before a downturn; trough is the lowest point before recovery.
• The question asks between which points the economy moves during the expansion phase.

Concept / Approach:
In the expansion phase, the economy recovers from a trough and moves towards a peak. During this phase, real GDP rises, unemployment falls, business optimism improves and investment increases. Households and firms spend more, and capacity utilisation improves. The peak marks the end of this rising phase and the beginning of a contraction. In contrast, the movement from peak to trough describes a downturn or recession. Therefore, the correct description of the expansion phase is that the economy moves from trough to peak with rising output and employment.

Step-by-Step Solution:
Step 1: Recall the sequence of business cycle phases: starting from a trough, the economy enters an expansion, reaches a peak, then moves into contraction, and eventually returns to a trough.Step 2: Identify that expansion is the rising phase, and therefore must start at the low point, the trough.Step 3: Recognise that expansion ends at the high point, the peak, which precedes any downturn.Step 4: Choose the option that states that the economy moves from trough to peak with rising output during this phase.

Verification / Alternative check:
You can verify this by visualising a simple wave shaped diagram of the business cycle. Label the lowest point as trough and the highest as peak. The upward slope from the trough to the peak represents expansion: GDP and employment are rising, and economic confidence is strong. The downward slope from peak to trough represents contraction or recession. When you map the options in the question onto this diagram, it becomes clear that trough to peak is the correct description of expansion. Any option that mentions peak to trough is describing contraction instead.

Why Other Options Are Wrong:
Option A is wrong because movement from peak to trough is the contraction or recession phase, not expansion. Option B is vague and does not correctly describe movement between specific turning points; it mixes contraction with trend without clarity. Option D, from trough to trough, describes a full cycle rather than a single phase and therefore is not a correct description of the expansion phase. Only option C accurately states that during expansion the economy moves from trough to peak with rising output, income and employment.

Common Pitfalls:
Students sometimes confuse the labels peak and trough, forgetting which one is the high point and which is the low point. Another common mistake is treating the entire cycle from one trough to the next as expansion, ignoring that there is also a contraction phase. To avoid these errors, remember the simple pattern: trough (low), then expansion (rise), then peak (high), then contraction (fall), and finally back to trough. Associating expansion with rising GDP and contraction with falling GDP will help you quickly identify the correct movement between turning points in exam questions.

Final Answer:
In the expansion phase of a business cycle, the economy moves from trough to peak with output, income and employment rising.