Which of the following observations concerning phases of a business cycle (or economic fluctuation) is incorrect? A) Maximum amount of unemployment occurs exactly at the trough

a. Maximum amount of unemployment occurs exactly at the trough

Reason: Expansion is the recovery phase of business cycle and demonstrates the increase in economic activity and increased production in the economy. This represents the portion from the lower end of the business cycle (trough) to the highest end of the business cycle (peak). Trough is the lowest point of the business cycle beyond which the business cycle will not decline any further, so there will be no output decline at or beyond the trough level. The contraction in the economy occurs during recession when the aggregate demand in the economy decreases. This is characterised by the decreased level of employments, and decreased level of production in the economy. Thus the contraction phase is akin to recession. So, we see that options b, c and d are correct. Option a is incorrect.