The figure given below represents the business cycle of an economy. Figure 7.1 Refer to Figure 7.1.The overall upward trend in real GDP reflected by this figure implies that:
A)the real GDP gap is widening over time.
B)cyclical unemployment is growing at positive rates.
C)consumer purchasing power is rising over time.
D)on average, labor productivity is declining.
E)expansionary phases outweigh contractionary phases in the economy over time.

Question

The figure given below represents the business cycle of an economy. Figure 7.1  Refer to Figure 7.1.The overall upward trend in real GDP reflected by this figure implies that:
A)the real GDP gap is widening over time. 
B)cyclical unemployment is growing at positive rates. 
C)consumer purchasing power is rising over time. 
D)on average, labor productivity is declining. 
E)expansionary phases outweigh contractionary phases in the economy over time.

Quizplus · Accepted Answer

The overall upward trend in real GDP indicates that the expansionary phases outweigh the contractionary phases in the economy over time. This implies that the economy is growing and improving over time, which would suggest that consumer purchasing power is rising and that cyclical unemployment is likely decreasing. The real GDP gap widening over time and labor productivity declining are both contradicted by the upward trend in real GDP.

The Figure Given Below Represents the Business Cycle of an Economy