Question

The periodic contraction and expansion that occur over time in virtually every economy is known as the _____.

A) Business cycle
B) Recession cycle
C) Expansion cycle
D) Fiscal cycle

Answer 1

The periodic contraction and expansion that occur over time in virtually every economy is known as the business cycle. The cycle consists of four phases: expansion, peak, contraction (recession), and trough.

Step-by-step explanation:

The periodic contraction and expansion that occur over time in virtually every economy is known as the business cycle. The business cycle reflects the natural fluctuation of the economy between periods of expansion (growth, or boom) and contraction (decline, or recession).

Such fluctuations around a long-term growth trend involve shifts in economic activity and are typically measured using the growth rate of real gross domestic product (GDP). The business cycle is an important concept because it helps economists and policymakers understand the changing nature of the economy and make decisions accordingly.

There are four phases to the business cycle:

1. Expansion
2. Peak
3. Contraction (Recession)
4. Trough

Understanding these phases allows for the recognition and prediction of how the economy might perform in the future, aiding in the development of fiscal policies to mitigate the effects of downturns.

Therefore the correct answer is A) Business cycle.