Canadian Securities Course (CSC) Practice Exam

During a "Peak" in the economic cycle, it is characterized by the maximum output and highest levels of activity before a downturn occurs. At this stage, demand for goods and services is typically high, leading to increased production. However, as resources become scarce and the economy reaches its limits, inflationary pressures often rise.

Rising interest rates are a common reaction during this phase, as central banks may increase rates to curb inflation and cool down an overheating economy. Additionally, market activity tends to decline as the combination of high interest rates, rising costs, and inflation may make consumers and businesses more cautious in spending and investing. This can lead to a slowdown in economic growth.

While the other options might reflect conditions at different phases of the economic cycle, they do not accurately capture the dynamics of a peak. For example, rising demand and falling stock prices would not typically occur simultaneously at a peak, as high demand usually supports higher stock prices. Decreasing wages and rising interest rates do not align well with peak conditions, where wages may be stable or increasing due to high demand. Falling sales and rising inventory are more characteristic of a recession or contraction phase, where demand diminishes rather than during a peak. Therefore, the scenario of rising interest rates coupled with declining