Suppose an economy has historically grown at a rate of 2.25%. The economy is growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.
A) expansion
B) recovery
C) contraction
D) trough

Question

Quizplus · Accepted Answer

The economy is likely in the expansion stage of the business cycle, as it is growing at a rate higher than its historical average, and the unemployment rate is low, indicating strong economic activity.

Suppose an Economy Has Historically Grown at a Rate of 2.25