The Business Cycle, GDP & Recessions

Refer to the political cartoon showing a rollercoaster labeled with economic themes. Which interpretation best explains how the cartoon connects to the business cycle?

• Economies move in straight, predictable growth without setbacks.

• Economic activity rises and falls over time, influenced by factors like inflation, supply chains, politics, and market changes.

• GDP only changes when a new virus variant appears, not due to other indicators.

• The business cycle is a one-time event that ends after a single downturn.

Refer to the GDP line graph labeled with business cycle phases. Which phase is represented by the steep upward movement immediately after the lowest point on the graph?

• Peak

• Contraction

• Recovery

• Trough

Which statement best describes/defines Gross Domestic Product (GDP)?

• The total value, in dollars, of all final goods and services produced within a nation each year

• The total number of goods produced by factories within a nation each month

• The average income earned by workers within a nation each year

• The value of intermediate goods used in production within a nation each quarter

During which labeled conflict does the graph show a sharp rebound into high positive growth following a deep trough around the mid-1940s?

• World War II

• Vietnam War

• Korean War

• Cold War

According to the labeled graph, what term describes the lowest point of GDP in the cycle?

• Peak

• Trough

• Recovery

• Expansion

In the labeled business cycle, what is the immediate phase after the economy hits its lowest point?

• Peak

• Contraction

• Recovery

• Depression

Which of the following is NOT included in the calculation of a nation's Gross Domestic Product (GDP)?

• The value of used goods sold at a garage sale

• The construction of a new office building

• The purchase of a new car by a household

• The salary paid to government employees

What does the 'peak' phase of the business cycle represent?

• The period when GDP is steadily declining

• The highest point of economic output before a downturn starts

• The time when the economy is experiencing zero growth

• The lowest point of economic activity before recovery begins

Which factor is most likely to cause a contraction in the business cycle?

• Technological innovation

• Growth in exports

• Increased consumer spending

• Rising unemployment rates

During which phase of the business cycle do industries increase the amount they produce? ​ (a)  

• Expansion
• Recession
• Contraction