Starting at full employment, a business cycle can be described by the following sequence: ____________ Equilibrium,____________ equilibrium, ____________equilibrium.
A) full-employment; below full-employment; above full-employment
B) below full-employment; full-employment; below full-employment
C) above full-employment; below full-employment; full-employment
D) below full-employment; full-employment; above full-employment

Question

Quizplus · Accepted Answer

The business cycle typically moves through the following stages:
1. Expansion - economic growth leads to increased employment and production, pushing the economy towards full employment.
2. Peak - the economy reaches its maximum level of employment and output, and inflation may begin to rise due to shortages in labor and resources.
3. Contraction - the pace of economic growth slows and unemployment begins to rise, leading to a decline in production and consumer spending.
4. Trough - the economy reaches its lowest point of the cycle, with high unemployment and low levels of production.
5. Recovery - the economy begins to pick up again, with increased demand for labor and resources pushing towards full employment.

Therefore, starting at full employment, the cycle would move to below full-employment (contraction) before returning to full employment (recovery), and potentially going above full employment (peak) before entering another contraction. Choice D describes this sequence.

Starting at Full Employment, a Business Cycle Can Be Described