Question

1. The phase of the business cycle in which output is highest relative to its potential level is the

1. Trough.
2. Expansion.
3. Peak.
4. Recession.
5. Trend.

2. The phase of the business cycle in which output is lowest relative to its potential level is the

1. Trough.
2. Expansion.
3. Peak.
4. Recession.
5. Trend.

3. The level of real national output purchased at each price level is called

1. A Production Possibilities Curve.
2. An aggregate demand curve.
3. An aggregate supply curve.
4. A market demand curve.
5. A derived demand curve

Answer 1

1. c. Peak

2. a. Trough

3. b. An aggregate demand curve

Explanation:

Business Cycle goes through its phases in the following sequence:

i) Recession:

The phase in the business cycle after the peak, during which output falls.

ii) Trough:

The phase of the business cycle in which output is lowest relative to its potential level.

iii) Expansion:

The phase in the business cycle after the trough during which national output rises.

iv) Peak:

The phase of the business cycle in which output is highest relative to its potential level.

Trend - The line through the business cycle is called the trend line. This shows that the economy is moving upwards or growing.

Aggregate demand curve shows the level of real national output demanded at various price levels. This curve slopes downward from left to right, as there is an inverse relationship between national output and price.