Time bunching tends to amplify business cycles because:
A) assets are typically worth more in booms than in recessions.
B) the returns to work are higher in booms than in recessions,so people work more during booms and less during recessions.
C) the returns to investment are higher when others are investing as well,thus we see more investment during booms and less during recessions.
D) the uncertainty of recessions tend to increase people's job search time,while greater certainty decreases search time during booms.

Question

Quizplus · Accepted Answer

Time bunching refers to the phenomenon that individuals and firms tend to undertake certain activities at the same time, leading to a concentration of economic activity in certain periods. When returns to investment are high, firms are more likely to invest, and when others are also investing, the returns are even higher, leading to a positive feedback loop. However, when the economy is in a recession, firms are less likely to invest, and this decreases overall investment in the economy. This can amplify business cycles by creating bigger booms and deeper recessions.

Time Bunching Tends to Amplify Business Cycles Because