Expansion in the business cycle is best described as which of the following?

• A. A period when GDP contracts and unemployment rises.
• B. A period when business activity surges and GDP expands until it reaches a peak.
• C. A flat period with no change in economic activity.
• D. A short lull before a new recession begins.

Answer: (B)

Expansion is the phase of the business cycle when economic activity is rising. GDP grows, production and sales pick up, and unemployment declines as more people find work. This uptrend continues as demand strengthens, investment picks up, and incomes rise, until the economy reaches a peak where growth slows and the next stage begins.

That makes the best choice: a period when business activity surges and GDP expands until it reaches a peak. The other descriptions fit different phases: a downturn with falling GDP and rising unemployment; a flat period with little or no change; or a short lull before a recession.