Which of the following is correct when describing business cycles?
I. The economy does not grow or shrink at a steady pace.
II. Short- run aggregate supply increases at a fixed pace.
III. There are usually a few years between recessions.
A) I and II
B) I and III
C) II and III
D) I only

Question

Quizplus · Accepted Answer

Business cycles are characterized by fluctuations in economic activity, with periods of expansion (growth) followed by periods of contraction (recession). These fluctuations are not steady or constant, as stated in option I. Option II is incorrect since short-run aggregate supply can increase or decrease depending on various factors. Option III is partly correct: while there is no fixed time frame between recessions, typically they occur every 5-10 years. Therefore, only option I and III are correct, making choice B the best answer.

Which of the Following Is Correct When Describing Business Cycles