The figure given below represents the business cycle of an economy.?Figure 7.1

-Refer to Figure 7.1. At point D, lagging economic indicators should show that:
A) real GDP is expanding.
B) real GDP falls to zero.
C) real GDP is contracting.
D) real GDP growth is zero.
E) real GDP growth is positive.

Question

The figure given below represents the business cycle of an economy.?Figure 7.1
 
-Refer to Figure 7.1. At point D, lagging economic indicators should show that:
A) real GDP is expanding. 
B) real GDP falls to zero. 
C) real GDP is contracting. 
D) real GDP growth is zero. 
E) real GDP growth is positive.

Quizplus · Accepted Answer

Point D on the business cycle represents the trough or the bottom of the cycle where the economy is contracting. Lagging economic indicators, which reflect past economic activity, should show a decline in real GDP and employment during this phase. Therefore, the best choice is C, i.e., real GDP is contracting.

The Figure Given Below Represents the Business Cycle of an Economy.?Figure