Business cycle persistence refers to the property that
A) real GDP is rarely exactly at trend.
B) booms and recessions last a long time.
C) when real GDP is above trend, it tends to stay above trend, and when it is below trend, it tends to stay below trend.
D) business cycles are persistently hard to predict.
E) real GDP tends to stay in the peaks and troughs of the business cycle.

Question

Quizplus · Accepted Answer

Business cycle persistence refers to the tendency of real GDP to remain above or below trend. When the economy is in a boom, it tends to stay above trend for some time, and when it is in a recession, it tends to stay below trend. This is because the factors that drive economic growth and contraction have a lasting effect on the economy.

Business Cycle Persistence Refers to the Property That