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 will be positive over time.

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 will be positive over time.

Quizplus · Accepted Answer

At point D, the economy is in the contraction phase, which means that real GDP is falling. Lagging economic indicators, which include factors such as the unemployment rate and corporate profits, reflect past changes in the economy and should show that real GDP is contracting. Therefore, the correct answer is C.

The Figure Given Below Represents the Business Cycle of an Economy