8 Key facts about economic fluctuations Aa Aa The following

8. Key facts about economic fluctuations Aa Aa The following graph approximates business cycles in the United States from January 1973 to January 1983. (Not This problem uses U.S. data rather than Australian data since the United States economy experienced more fluctuations during this time and, thus, serves as a better illustration for this question.) The vertical blue bans coincide with periods of six or more months of declining Real Gross Domestic Product (real GDP). REAL GOP Billions of dellars) 5500 5200 4900 4600 4300 4000 1973 1975 1977 1979 1981 1983 YEAR Notice that real GDP trends upward over time but experiences ups and downs in the short run. A period of declining real GDP, such as the blue-shaded period in 1980, is known as True or False: The small ups and downs in real GDP appear to follow a consistent, predictable pattern during this period O True O False Which of the following probably occurred as the U.S. economy experienced declining real GOP in late 1981 and earty 1982? Check all that apply. car sales decined. Total real income declined Corporate profits increased. Investment spending declined

Solution

Recession - period of declining GDP False Car sales declined, real income declined and investment spending declined because economy is experiencing recession. 1976 and 1978. During expansion, economy starts performing good leading to increase in investment, consumption, income, production etc. Therefore demand for labor increases and unemployment decereases.