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Example Questions
Example Question #2 : Tax Policy
In order, the four phases of the business cycle are:
Possible Answers:
expansion, contraction, peak, and trough
contraction, expansion, peak, and trough
expansion, peak, contraction, and trough
peak, contraction, expansion, and trough
Correct answer:
expansion, peak, contraction, and trough
Explanation:
The four phases of the business cycle are expansion, peak, contraction, and trough. Real GDP growth is positive during an expansion, followed by a point at which real GDP growth peaks, then begins to decline during a contraction, and finally a bottoming out at the point of the trough. Each of the other answer choices represents a distortion of this order.
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