ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Employ more workers and invest in machinery and equipment
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Cut back on spending and reduce costs
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Work shorter hours
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Go on holiday because there’s not much work
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Detailed explanation-1: -Expansion is the phase of the business cycle where real gross domestic product (GDP) grows for two or more consecutive quarters, moving from a trough to a peak. Expansion is typically accompanied by a rise in employment, consumer confidence, and equity markets and is also referred to as an economic recovery.
Detailed explanation-2: -An economic expansion is associated with: increase in production/output • decrease in unemployment • increase in wages • increase in consumer spending. As the economy expands, businesses generally see an increase in sales or demand for their products.
Detailed explanation-3: -A business cycle has four main phases – expansion, peak, contraction and trough. In an expansion, households demand more goods and services, businesses hire more workers, and wages and prices typically increase.
Detailed explanation-4: -Answer and Explanation: During the expansionary phase of the business cycle, the aggregate demand curve shifts right. A rightward shift in the aggregate demand curve will cause output (real income) to rise and the price level to rise.