In May 2009,the U.S.auto industry experienced a 34 percent decline in sales compared to May 2008.The automobile industry was experiencing the effects of

Question

Quizplus · Accepted Answer

The decline in sales for the U.S. auto industry in May 2009 is a clear indicator of the effects of the business cycle. The business cycle is the natural rise and fall of economic activity that cycles between periods of expansion and contraction. In this case, the decline in sales was a result of an economic contraction, which is a typical feature of the business cycle. The other options (deflation, underground economy, depreciation) are not relevant to this scenario.