Question

 Below, you are provided with a graph that depicts how Potential GDP and Real GDP change over time. You will-use this graph to identify peaks, troughs, expansionary periods, and recessionary periods along the business cycle.

 Part 1: Complete the statement below with A, B, C, or D.

 The economy depicted above is at a peak along the business cycle at

 Point _______ 

 Part 2: Complete the statement below with A, B, C, or D.

 The economy depicted above is at a trough along the business cycle

 at Point _______ 

 Part 3: Complete the statement below with A, B, C, or D.

 The economy depicted above is experiencing an expansionary

 period of the business cycle at Point _______ 

 Part 4: Complete the statement below with A, B, C, or D.

 The economy depicted above is experiencing a recessionary period

 of the business cycle at Point _______ 

Answer 1

Part 1:

The economy depicted above is at a peak along the business cycle at poin A. At point A real GDP of the economy is at the highest point and from the right side of the point real GDP starts falling.

Part 2:

The economy depicted above is at a through along the business cycle at point B. Point B reperesents the end of a period of decline in business activity and transition to expansion.

Part 3:

The economy depicted above is experiencing an expansionary period of business cycle at point C. At point C real GDP of the economy is at an increasing phase above potential GDP. This means at point C the business activities in the economy are expanding.

Part 4:

The economy depicted above is experiencing a recessionary period of the business cycle at point D. At point D real GDP of the economy is declining towards potential GDP. This means the business activities in the economy are experiencing a recessionary period.