Economics Study Set 20

Business

Quiz 8 :
Economic Fluctuations, Unemployment, and Inflation

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Quiz 8 :
Economic Fluctuations, Unemployment, and Inflation

The four phases of business cycles are peak phase, recessionary phase, depression phase and lastly expansion phase. During the peak phase economy operates at their capacity level due to which real GDP is high. This results in more employment opportunities for people. In the recessionary phase the economy faces a downturn due to which real GDP slows down and the unemployment rate rises. When the recession is for a very long time period then the depression phase enters and the real GDP is at its lowest level and the unemployment rate is at its highest level. Lastly in expansion phase the real GDP starts increasing and the rate of unemployment declines. All the four phases have their different time periods and it vary in lengths and magnitude. Their durations vary with each phase and therefore can't be predicted.

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Generally efficiently working economy system has some unemployed resources because it always results in wastage. This happens because many times skills are not correctly matched with the available jobs. Due to which a person possessing high skills when get the low skills job then its results in wastage of his skills and his resources remains unutilized.

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