What best describes the expansion phase of the business cycle?

The expansion phase of the business cycle is characterized by rising economic activity, which includes increasing employment levels and upward pressure on prices. During this phase, businesses experience growth, leading to higher production and sales. As companies hire more workers to meet the demand for goods and services, unemployment tends to decrease, leading to greater disposable income for consumers. This increased purchasing power contributes to higher consumer spending, which further fuels economic growth.

Prices may also rise during an expansion as demand increases and resources become scarcer, resulting in upward pressure on inflation. Therefore, the essence of the expansion phase encapsulates a thriving economy where both employment and prices are on the rise. These dynamics are foundational to understanding economic cycles and the fluctuations that economies experience over time.