Answered: What is business cycle

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter12: Business Cycles And Unemployment

Section: Chapter Questions

Problem 1SQP

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What is business cycle

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explanation

An economy has various ups and downs like shown in the figure below. Business cycle shows the fluctuations in the economy with respect to time. We measure it by two components, real GDP. Real GDP is the total output produced by an economy corrected for inflation and time is in years.

The real GDP will increase till the time it reaches the peak point. That is highest level of real GDP growth for the economy and before that the economy was shrinking this period is known as contraction or recession. It shrinks till the time it reaches the trough which is the lowest point of the economy.

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