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The economy will then start to shrink as it descends from the peak and enters recession.
The economy's growth rate declined during the depression phase. Up until the demand and supply for products and services, as well as the prices of the factors, reach their lowest point, there is still a further decrease. Eventually, the economy sinks to its lowest point. The economy enters the peak phase when it reaches its highest level of output, which marks the end of growth. After this, a contractionary phase occurs as employment levels and housing starts start to drop.
The time between an economic activity's peak and its subsequent trough, or lowest point, is known as a recession. The economic cycle between its trough and peak is one of expansion.
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