Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% 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 trough stage, as it has stopped declining and is expected to grow again, indicating the end of contraction and the beginning of recovery.

Suppose an Economy Has Historically Grown at a Rate of 1.25