What do you mean by prosperity phase in business cycle?

Prosperity

Increases in output, employment,

investment demand, profits, bank loans, prices, standard of living,

etc. are the main features of the phase of prosperity. We can

observe the following important features during this phase.

"MARGIN: 0in 0in 0pt 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list .5in">

1) Bank credits will grow rapidly even though the rate of interest

is higher. There is general expansion of credit.

"MARGIN: 0in 0in 0pt 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list .5in">

2) Idle funds are channelised into productive areas since stock

prices are higher due to higher profitability.

"MARGIN: 0in 0in 0pt 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list .5in">

3) Money supply increases and it continues to flow in all kinds of

economic activities.

"MARGIN: 0in 0in 0pt 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list .5in">

4) Excess capacity gradually disappears creating shortage of labour

and raw materials.

"MARGIN: 0in 0in 0pt 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list .5in">

5) After full employment is achieved, a further increase in demand

leads to increase in prices. But factor remuneration like wages

interest rates, rents, taxes etc. do not rise in proportion to the

rise in prices so business continues to remain profitable. This

increases investment especially of inventories. Demand for bank

credit increases.

This way, the expansionary

process becomes cumulative and the economy reaches the Peak.