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.

Question

Quizplus · Accepted Answer

Business cycle persistence refers to the tendency of real GDP to stay above or below trend for an extended period. This means that when real GDP is above trend, it tends to continue being above trend, and when it is below trend, it tends to continue being below trend. Thus, option C is the correct answer. Option A is incorrect because it describes the fact that real GDP is rarely exactly at trend, which is a different concept. Option B is incorrect because it describes the duration of booms and recessions, which can vary. Option D is incorrect because it suggests that business cycles are persistently hard to predict, which is not the same as business cycle persistence.

Business Cycle Persistence Refers to the Property That