Final answer:
The phase of the business cycle where Real GDP increases and cyclical unemployment decreases is known as the expansion phase.
Step-by-step explanation:
The part of the business cycle in which output, or Real GDP, increases and cyclical unemployment decreases is the expansion phase. During this phase, there is a sustained increase in real GDP, production, and employment, leading to an overall improvement in the economy. Cyclical unemployment falls because the higher demand for goods and services from increased economic activity requires more workers, thus reducing unemployment. Contrastingly, during a recession, Real GDP decreases for at least 6 consecutive months and the unemployment rate usually increases. It's important to understand these phases to gauge the health of an economy and make informed financial decisions.