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
A) a trough in the business cycle will soon be reached.
B) an expansion is occurring in the economy.
C) inflation is not occurring.
D) a recession is in progress.

Question

Quizplus · Accepted Answer

The decrease in unemployment and positive growth in real GDP indicate that the economy is expanding. A trough in the business cycle or a recession would be characterized by negative growth in GDP and increasing unemployment. The information provided doesn't give any indication of whether inflation is occurring or not.

An Observer of the Economy Notices That Over the Past