Which of the following is correct?
A)Short run fluctuations in economic activity happen only in developing countries.
B)During economic contractions most firms experience rising sales.
C)Recessions come at regular intervals and are easy to predict.
D)When real GDP falls, the rate of unemployment rises.

Question

Quizplus · Accepted Answer

This is a basic macroeconomic relationship known as Okun's law. When real GDP falls, the rate of unemployment tends to rise. Option A is false because short-run fluctuations in economic activity can occur in any country, not just developing ones. Option B is false; during an economic contraction, most firms actually experience declining sales. Option C is also false; recessions are unpredictable and their timing is difficult to predict.

Which of the Following Is Correct