Understanding the Business Cycle: Fluctuations in Economic Activity and Growth

The video explains the business cycle, highlighting the regular fluctuations in economic activity that economies experience over time. It describes the stages of the business cycle: growth, boom, recession, and trough, and how these stages affect real GDP, inflation, and deflation. The video emphasizes that while real GDP may increase over time, it does not do so smoothly due to these fluctuations. Understanding these cycles helps in analyzing economic conditions and predicting future trends.

What is the primary reason for the overall increase in real GDP over time despite fluctuations?

• Regular economic fluctuations

• Constant economic growth

• Decreasing unemployment rates

• Stable inflation rates

Which stage of the business cycle is characterized by rapidly rising economic growth and higher inflation?

• Boom

• Trough

• Recession

• Slowdown

What happens to real GDP during a recession?

• It rises above the long run trend growth line

• It fluctuates unpredictably

• It remains constant

• It falls below the long run trend growth line

How does a positive output gap affect an economy?

• It leads to deflationary pressures

• It causes economic stagnation

• It brings inflationary pressures

• It stabilizes the economy

What determines the duration of growth or slowdown in the business cycle?

• Government policies

• Individual economic conditions

• Global market trends

• Technological advancements