Diana has noticed that many of her coworkers at Bubble, Inc., have been laid off over the past year due to low profits. Also, prices were lowered recently due to economic conditions. Even though Diana is worried about her future at Bubble, she has noticed that employment has risen over the past month and that prices are slowly increasing. Because other companies have had the same experience, what phase of the business cycle is the economy currently in?

Macroeconomic theory suggests that capitalism is cyclical, that is, the capitalist economy alters moments of expansion and economic retraction. In times of expansion, the economy is warm, so production increases, making it easier to get jobs and make money. In this scenario of high production and low unemployment, the demand for goods and services - such as gas and food - increases, raising its price.

On the contrary, in situations of economic downturn, companies have a depreciation of their sales prospects, reducing production and consequently increasing unemployment. This reduces the demand for goods and services and consequently their prices. Diana lives in an economic structure that begins to show signs of improvement in the indicators, which means that the economy is recovering and will enter the expansionary moment of the economic cycle.