Question

What is a business cycle? Group of answer choices

Answer 1

Answer:

b.It is the economy's pattern of fluctuations in economic activity: expansion followed by contraction and then by another expansion.

Explanation:

A business cycle refers to the natural increase and decrease in economic production that occurs over time. Economist uses the gross domestic product(GDP) to tell whether the economic output is rising or falling.

A business cycle has four phases. The phases do not occur at regular intervals, but they have recognizable features. They are

1. Expansion: The economy is growing. The GDP is increasing at around three percent.  The unemployment and Inflation rate are within acceptable levels.  A well-managed economy should remain in expansion for years.
2. Peak: It the month when production starts to ease . At the peak, the expansion transition turns to contraction.
3. Contraction: Economic growth is weak. GDP falls to below 2 percent. People lose jobs, and the unemployment level begins to rise. Should GDP turn to negative, it becomes a recession.
4. Trough: It is the month when the economy turns from contraction to expansion. Its when the economy is booming.