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Chapter 16: Problem 2

The phase of a business cycle during which real GDP reaches its minimum level is the a. recession. b. depression. c. recovery. d. trough.

Short Answer

Expert verified
The correct answer is d. Trough, as it is the phase in a business cycle during which the real GDP reaches its minimum level, marking the end of a recession and the beginning of recovery.

Step by step solution

01

Understanding the phases of a business cycle

A business cycle consists of four phases: 1. Expansion: The phase of increasing economic growth and real GDP, characterized by higher employment levels and rising incomes. 2. Contraction or Recession: The phase of decreasing economic growth, typically lasting 6 to 18 months, characterized by higher unemployment rates and declining real GDP. 3. Trough: The phase at which the real GDP reaches its lowest point in the business cycle, marking the end of a recession. 4. Recovery: The phase following the trough, where the economy starts to rebound, real GDP starts increasing, and employment begins to improve.
02

Identifying the phase when real GDP reaches its minimum level

As per the above explanation, the trough is the phase during which real GDP reaches its minimum level, marking the end of the recession and the beginning of recovery.
03

Selecting the correct option

From the analysis, we can conclude that the correct answer is: d. Trough

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Most popular questions from this chapter

Which of the following is not a variable in the index of leading indicators? a. New consumer goods orders b. Delayed deliveries c. New building permits d. Prime rate

The sum of the frictional and structural unemployment rates is equal to the a. potential unemployment rate. b. actual unemployment rate. c. cyclical unemployment rate. d. full employment rate.

Frictional unemployment applies to a. workers with skills not required for existing jobs. b. short periods of unemployment needed to match jobs and job seekers. c. people who spend long periods of time out of work. d. unemployment related to the ups and downs of the business cycle.

People who are not working will be counted as employed if they are a. on vacation. b. absent from their job because of bad weather. c. absent from their job because of a labor dispute. d. all of the above.

Unemployment that is due to a recession is a. involuntary unemployment. b. frictional unemployment. c. structural unemployment. d. cyclical unemployment.
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