Which of the following will most likely occur during the contractionary phase of a business cycle?
A) Real GDP rises, and the unemployment rate falls.
B) Real GDP declines, and the rate of inflation rises.
C) The sales of most businesses decline, and the unemployment rate rises.
D) Inflation rises, and employment/population ratio falls.

Question

Quizplus · Accepted Answer

During the contractionary phase of a business cycle, the economy is slowing down and entering a recession. This means that sales for most businesses will decline, leading to rising unemployment rates as companies start laying off workers. Option A is incorrect because Real GDP will actually decline during this phase, not rise. Option B is incorrect because the rate of inflation usually falls during a contractionary phase due to lower demand in the economy. Option D is incorrect because inflation typically decreases during this phase and the employment/population ratio will also decline due to rising unemployment rates.

Which of the Following Will Most Likely Occur During the Contractionary