Answer to Question 1
The four phases of the business cycle are:
expansion--employment is typically increasing/unemployment falling
peak--output is the highest during the cycle, employment typically increases to this point (before it begins to fall)
contraction--employment falls and unemployment rises (as output falls)
trough--output reaches its lowest level during the cycle, employment is typically falling until the trough is reached (after which it begins to rise)
Answer to Question 2
In times of unanticipated inflation, farmers were able to repay their loans with less valuable dollars. The rising price of crops would mean that farmers needed to produce slightly less crops in order to repay their loans.