RECA Commercial Practice Exam

The phase of the market cycle that follows Expansion is Hypersupply. During the Expansion phase, the economy is growing, and demand for goods and services increases. This growth phase often leads to an increase in production, which, if sustained too long, can result in an oversupply of goods or real estate in the market.

Hypersupply refers to a situation where production and supply outstrip demand, leading to a surplus. This is often the stage where prices start to stabilize or decline because the excess supply begins to exceed consumer demand. It's important to note that this phase indicates a shift in market dynamics and signals that the economy may be moving towards a downturn, while still being a consequence of the previous robust growth during Expansion.

The other phases, such as Recovery, Recession, and Stagnation, occur at different points in the cycle, with Recovery typically appearing after Recession and Stagnation being a prolonged period of limited growth or decline, rather than the direct follow-up to Expansion. Thus, Hypersupply is the correct identification of the phase that directly follows Expansion in the market cycle.