The defining feature of business cycles is that they are
A) changes in the trend component of real GDP.
B) fluctuations about trend in real GDP.
C) fluctuations about trend in the unemployment rate.
D) fluctuations about trend in the level of employment.
E) fluctuations about trend in standards of living.

Question

Quizplus · Accepted Answer

Business cycles refer to fluctuations in real GDP around its long-term trend level. These fluctuations are characterized by periods of economic expansion, contraction, and recovery. Hence, option B is the best choice. Option A refers to changes in the trend itself, while options C, D, and E only capture the labor market or economic welfare dimensions of business cycles, but not their overall macroeconomic nature.

The Defining Feature of Business Cycles Is That They Are