Answered

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Which of the following correctly describes the business cycle? It is the constant rise in GDP over time. It is the fluctuations of GDP around the potential output. It refers to excess unemployment during recessionary periods. It refers to ups and downs in business revenue during expansions and recessions.

Sagot :

Answer:

It is the fluctuations of GDP around the potential output

Explanation:

Business cycle refers to the fluctuations of Gross Domestic Product around the potential output. It refers to the expansion and contraction of GDP around its potential output or its long term natural growth rate

In an boom, GDP is above the potential output and in a contraction, GDP is below the potential output

There are 4 stages of business cycle

1. Expansion - At this stage unemployment is low and economic indicators are positive. Money velocity is also high

2. Peak - this is the highest point of economic expansion. The economy cannot grow beyond this point. From this point, the GDP starts to decline

3. Recession : It is the stage after a peak. The positive economic indicators start to decline

4. Depression

Trough - growth rate becomes negative

6. recovery :  the economy begins to expand again

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