ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The business cycle model shows how a nation’s real GDP fluctuates over time, going through phases as aggregate output increases and decreases. Over the long-run, the business cycle shows a steady increase in potential output in a growing economy.

Detailed explanation-2: -As the economy moves through the business cycle, a number of additional economic indicators tend to shift alongside GDP. During an economic expansion, economy-wide employment, incomes, industrial production, and sales all tend to increase alongside the rising real GDP.

Detailed explanation-3: -At time t 1 in Figure 5.1 “Phases of the Business Cycle”, an expansion ends and real GDP turns downward. The point at which an expansion ends and a recession begins is called the peak of the business cycle. Real GDP then falls during a period of recession.

Detailed explanation-4: -The gross domestic product, or GDP, is the total market value of goods and services the country produces. As the economy goes through business cycle changes, these positively or negatively affect the GDP.