An observer of the economy notices that over the past 12 months the unemployment rate has fallen from 7.0 percent to 6.5 percent. During the same time, the rate of growth in real GDP has been positive. From this information we might conclude that

Question

Quizplus · Accepted Answer

The decrease in the unemployment rate and positive growth in real GDP suggest that the economy is experiencing an expansion. This is because more people are employed, and the economy is producing more goods and services. The other options such as a trough or recession do not fit the description of the current situation. It is not possible to determine whether inflation is occurring based on this information alone.

An Observer of the Economy Notices That Over the Past