Final answer:
The question involves understanding the concepts of the business cycle and real GDP, with the focus on economic expansions, contractions, and the identification of periods like recessions. It also looks at the actual U.S. GDP performance described by idealized and actual business cycle graphs, compared to potential GDP estimates by the Congressional Budget Office.
Step-by-step explanation:
The question provided pertains to real GDP and the business cycle, specifically dealing with the patterns of economic expansions and contractions observed through fluctuations in real GDP. The business cycle reflects the natural rhythm of the economy, which includes periods of growth (expansion) followed by slowdowns or declines (contraction and potentially recession). Despite these cycles, over the long term, the U.S. real GDP has experienced substantial growth. According to the nonpartisan Congressional Budget Office, the potential GDP line is smoother and serves as a benchmark to measure how actual GDP has performed over time.
Given this information, an idealized business cycle would exhibit these phases clearly, whereas an actual business cycle graph plotting real GDP from 1999 to 2002 would show the inherently more erratic nature of an economy. Importantly, when real GDP declines substantially, it indicates a recession, which begins at the peak of the business cycle and ends at the trough.