Which statement is correct?
A) All sectors of the economy are affected to similar degrees by business ﬂuctuations.
B) Real output and employment generally show little variance over the business cycle.
C) The production of nondurable consumer goods is more stable than the production of durable consumer goods over the business cycle.
D) Recessions have not been severe because economists and statisticians have been able to predict their occurrence and intensity with high accuracy.

Question

Quizplus · Accepted Answer

The production of nondurable goods such as food and clothing is relatively stable over the business cycle as they are necessities and demand for them is less volatile. Durable goods such as cars and appliances are more responsive to changes in income and credit conditions and thus, their production is more volatile over the business cycle. A and B are incorrect as different sectors have different degrees of sensitivity to business fluctuations and real output and employment do show significant variance over the business cycle. D is incorrect as recessions can be unpredictable and their severity can vary.

Which Statement Is Correct