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Which part of real GDP fluctuates most over the course of the business cycle?

a. consumption expenditures
b. government expenditures
c. investment expenditures

1 Answer

2 votes

Answer:

c. investment expenditures

Step-by-step explanation:

The reason for this is that during business cycles investors gain trust in the economy during a boom and invest a lot and during a recession they lose trust in the economy and decrease their investment by a lot, where as a lot of consumption like food, medicine, petrol etc remains mostly unaffected by changes in business cycle. Also government spending does not fluctuate a lot during the course of a business cycle because government spending is either long term like development projects.

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