Question

Which conclusion about the economic represented in the graph does the study growth line best support?

A. The economy has more pronounced peaks than values in each business cycle.
B. Technology is weak and will likely enter depression in the next business cycle.
C. The economy does not show a constant pattern in its business cycles.
D. The economy as a whole continues to grow between each business cycle.

Answer 1

The study growth line best supports the conclusion that the economy as a whole continues to grow between each business cycle, as indicated by the general long-term upward trend in real GDP, despite annual fluctuations.

Step-by-step explanation:

Looking at the patterns in business cycles, we can interpret the study growth line, especially in reference to the U.S. real GDP growth graphically represented in the business cycle. The conclusion that the economy as a whole continues to grow between each business cycle is best supported by the study growth line. This is indicated by the overall upward trend despite the fluctuations associated with the peaks and troughs of the business cycles.

Although GDP does not increase the same amount each year, due to cycles of expansion and contraction, the general direction is upward, indicating economic growth over time. This is also corroborated by the AD/AS diagram which shows the long-run economic growth represented by a gradual shift to the right of aggregate supply. Thus, the study growth line demonstrates a long-term increase in the potential GDP and an overall economic development.