Question

There are many misunderstandings about the business cycle and how it can impact an economy. Determine if each of the given statements are true or false.

1. Business cycles can be described as fluctuations from the economy's long-term growth trend.
2. The four phases of business cycles are peaks, troughs, expansions, and recessions.
3. Business cycles are common in emerging economies but not in developed economies.
4. When a business cycle reaches the trough, the economy is usually operating at its capacity.
5. The peak of a business cycle is followed by a downturn or recession.
6. Business cycles last for followed by a downturn or recession approximately nine months.

Answer 1

1. True

2. True

3. False

4.False

5.True

6.False

Step-by-step explanation:

1. Business Cycles are basically due to country's economic growth trends. When a country's economy is prospering then the Business Cycle will be in a expansion category.

2. There are four phases of business cycle in an economy. Peaks, Troughs, Expansions and Recession. Expansion stage is characterized as when the economy is a country is growing, country is in a developing stage and employment increases.

3. Business cycles are for every country. Even the developed countries face Business Cycle fluctuations due to Ups and Downs in an economic condition.

4. It is usually not true that the economy is operating at its capacity when it faces troughs in a Business Cycle. Trough is a stage where there is minimum of investment in a country, unemployment is increased, growth is business is near to zero and decline in business activities.

5. When an economy reaches to peak in a Business Cycle it then follows it cycle and enter into a recession or a downturn. At peak when there is end of expansion in a business it starts contacting and recession happens in a Business Cycle.

6. Business Cycle may last for a few months or a year but it is not necessary that each Business Cycle lasts for exactly nine month. It can be lower or greater depending on the economic conditions of a country.