During the contraction phase of a business cycle, which combination is most likely?
Correct answer: A. Falling output and rising cyclical unemployment
- A. Falling output and rising cyclical unemployment
- B. Rising output and falling cyclical unemployment
- C. Stable output and falling price uncertainty
- D. Higher production and stronger investment demand
Explanation
A contraction is a period in which aggregate economic activity declines, commonly producing lower output and higher cyclical unemployment. Expansion has the opposite general pattern, although individual indicators may not move simultaneously.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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