What characterizes economic expansions?

Economic expansions are defined by periods of rapid growth of output, which typically involve an increase in the production of goods and services within an economy. During these times, businesses invest in new projects, hiring increases, and consumer confidence often rises, which contributes to higher spending. The growth is evidenced by various indicators, such as rising gross domestic product (GDP), increased employment rates, and generally improved standards of living for individuals within the economy.

This growth phase creates a favorable environment for business and investment. As companies expand their operations to meet rising demand, they often employ more workers, leading to lower levels of unemployment. Additionally, during an expansion, income levels tend to rise, which fuels further consumption and investment.

The other scenarios presented do not align with the characteristics of an economic expansion. Declining output and economic activity would characterize a recession, while increased unemployment rates indicate a weakening economy. Steady prices and stagnant growth suggest a lack of economic movement, often referred to as stagnation, which is also not indicative of an expansion. Thus, the defining trait of economic expansions is indeed the rapid growth of output.