In a hypothetical economy, current inflation-adjusted economic output is rising and is expected to continue rising in the coming months. This economy is currently in the
a)peak stage of the business cycle
b)trough stage of the business cycle
c)contraction stage of the business cycle
d)expansion stage of the business cycle
1. real GDP
2. expansion stage of the business cycle
3. two
4. high unemployment
5. shock
100% Stages of the Business Cycle Quick Check
No one
D. Expansion stage of the business cycle
To determine the stage of the business cycle in a hypothetical economy, we need to understand the characteristics of each stage and compare them to the given information.
The business cycle typically consists of four stages: expansion, peak, contraction, and trough.
During the expansion stage, the economy experiences increasing levels of economic output, rising employment, and overall growth. In this stage, the economy is characterized by high levels of consumer spending, business investment, and optimism.
The peak stage occurs after the expansion stage and represents the highest point of economic activity. It is characterized by full employment, high levels of production, and maximum output. Inflation may start to rise during this stage, and it is often followed by a contraction.
The contraction stage, also known as a recession, is identified by a decline in economic output, increasing unemployment rates, and a reduction in consumer spending and business investment. This stage is marked by falling confidence, decreased production, and reduced economic activity.
The trough stage is the lowest point of the business cycle. It represents the end of a contraction and the beginning of recovery. In this stage, economic activity starts to pick up, and output gradually begins to increase.
Based on the information given, the hypothetical economy is experiencing rising inflation-adjusted economic output, which indicates that it is in an expansion stage of the business cycle (option d).
To reach this conclusion, we considered the fact that the economy is currently on an upward trend with expectations for continued growth. This aligns with the characteristics of an expansion phase, where economic output is rising and the overall outlook is positive.