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QUESTION:
he graph included below approximates United States business cycles between quarter one of 1955 and quarter three of 1959. The shaded region denotes periods of six or more consecutive months of declining real gross domestic product (real GDP).
Source: “Current-dollar and Real GDP,” Bureau of Economics Analysis, last modified May 1, 13, accessed May 15, 13, http://www.bea.gov/national/xls/gdplev.xls.
Notice that real GDP trends upward over time but experiences ups and downs in the short run. These short-run fluctuations in real GDP are often referred to as    .
True or False: Short-term fluctuations in real GDP are irregular and unpredictable.
Which of the following probably occurred as the U.S. economy experienced declining real GDP in 1957?  Check all that apply.

ANSWER:

Notice that real GDP trends upward over time but experiences ups and downs in the short run. These short-run fluctuations in real GDP are often referred to asthe business cycle  Correct .
Points:
1 / 1
True or False: Short-term fluctuations in real GDP are irregular and unpredictable.
Correct
Points:
1 / 1
Close Explanation
Explanation:
Economic fluctuations correspond closely to business conditions: Most businesses do well during periods of expansion, and most businesses do poorly during periods of falling real GDP. The short-term fluctuations in real GDP are irregular and unpredictable. Recessions may occur close together or farther apart. The duration of recessions varies, and output tends to rise and fall at different rates over time. The ups and downs in real GDP are known as the business cycle, but this term is somewhat misleading because economic fluctuations do not follow a regular cycle.
Which of the following probably occurred as the U.S. economy experienced declining real GDP in 1957?  Check all that apply.
Correct
Correct
Correct
Correct
Points:
1 / 1
Close Explanation
Explanation:
Most macroeconomic quantities fluctuate together. Recall that real GDP measures the economy's total output and total income simultaneously. A decrease in real GDP, therefore, coincides with declining total income, declining personal income, and falling corporate profits. As incomes decline during a recession, so, too, does consumer spending on retail goods and services and on durable goods, such as automobiles. Households also contribute to declining investment expenditures by purchasing fewer new homes. As households spend less on products, firms cut back on industrial production and curb investment expenditures on physical capital.
The unemployment rate tends to rise during periods of falling real GDP as firms cut back on production and lay off workers. The unemployment rate tends to fall during economic expansions as firms expand production and hire additional workers.

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