Which phase of the economic growth cycle is characterized by declining GDP and rising unemployment levels?

The phase of the economic growth cycle characterized by declining GDP and rising unemployment levels is known as a recession. During a recession, economic activity slows down, leading to a decrease in the production of goods and services. As businesses respond to lower demand by cutting back on production, they often reduce their workforce, resulting in higher unemployment rates.

This phase typically follows a period of growth, where the economy may have been expanding steadily before entering a downturn. In a recession, consumer spending decreases, investment shrinks, and overall economic confidence declines, which collectively contribute to a contraction in GDP.

In contrast, the recovery phase marks an upturn in economic activity, where GDP starts to increase and unemployment begins to decrease. A peak represents the height of economic activity, just before the downturn begins, and a trough signifies the lowest point of economic activity before recovery starts to take hold. Therefore, the defining characteristics of declining GDP and rising unemployment align explicitly with the recession phase of the economic growth cycle.