Chapter 10: Problem 22

Which is the most accurate statement? (LO3) a) Business cycle forecasting dates back to biblical times. b) Business cycle forecasts are nearly always inaccurate. c) Business cycle forecasts are almost always accurate. d) It is virtually impossible to forecast business cycle turning points.

Short Answer

Expert verified

d) It is virtually impossible to forecast business cycle turning points.

Step by step solution

Statement a

Business cycle forecasting dates back to biblical times. This statement suggests that business cycle forecasting has been present since ancient times. While there might be some examples of attempts to predict economic trends in the past, the formal study of business cycles and systematic forecasting methods started only in the 20th century. Therefore, this statement is not entirely accurate.

Statement b

Business cycle forecasts are nearly always inaccurate. This statement is an exaggeration, but it is true that business cycle forecasts can be challenging and often face a certain degree of inaccuracy. However, saying that they are "nearly always inaccurate" is not correct, as there are cases where forecasts have provided valuable insights and estimations.

Statement c

Business cycle forecasts are almost always accurate. This statement is the opposite of statement b and is also not accurate. While forecasts can sometimes be accurate, a significant number of factors can impact the economy, making the predictions difficult. Consequently, business cycle forecasts cannot be considered "almost always accurate."

Statement d

It is virtually impossible to forecast business cycle turning points. This statement is the most accurate among the four options. Business cycles are known to be notoriously difficult to predict, and turning points (when the economy shifts from expansion to recession or vice versa) are even more challenging to forecast. While forecasting models and analysts might provide general estimations, it is generally accepted that predicting the exact timing and nature of the turning point is nearly impossible. Considering the analysis of each statement, the most accurate one is:

Answer

d) It is virtually impossible to forecast business cycle turning points.

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