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: -The GDP growth rate changes during the four phases of the business cycle: peak, contraction, trough, and expansion. In an expanding economy, the GDP growth rate will be positive because businesses are growing and creating jobs for greater productivity.

Detailed explanation-4: -Real GDP then falls during a period of recession. Eventually it starts upward again (at time t 2). The point at which a recession ends and an expansion begins is called the trough of the business cycle.

Detailed explanation-5: -The business cycle is a term used by economists to describe the increase and decrease in economic activity over time. The economy is all activities that produce, trade, and consume goods and services within the U.S.-such as businesses, employees, and consumers.