Describe the four stages of the business cycle. What are the characteristics of each stage and how would a financial manager adjust their strategic and tactical planning for changes in the business cycle?

What will be an ideal response?

Peaks in the business cycle tend to occur when the capacity-to-output gap is smallest, and troughs tend to occur when the gap is largest. When changes in real GDP are positive, the economy is said to be expanding. Conversely, two consecutive quarterly declines in real GDP are generally said to indicate a RECESSION.