Question

The graph shows a business cycle for a hypothetical economy. Label all five areas on the graph using the appropriate economic term. Some of the terms may refer to more than one area on the graph, and some terms may not refer to any of the areas on the graph.

Answer 1

Top: Peak

Middle: Trough

Bottom (in order): Recession, Expansion, Recession

Step-by-step explanation:

A peak occurs when economic output reaches a maximum and transitions from getting larger to getting smaller. The top label points out the two peaks in this business cycle.

A trough is just the opposite. Economic output is minimized and changes from shrinking to expanding as time elapses. The second highest label points out the two troughs in this graph.

A recession occurs when economic output is shrinking. The shaded areas show declining economic output. That is, the curved line (the height of which measures economic output) is downward‑sloping. These are both recessions.

An expansion is the opposite. Between the two recessions, growing economic output indicates an expansion. The term expansion belongs in the label referring to the area between the two shaded bars.

The remaining terms are not typically used to describe the business cycle.