Economics & AnalysisQuestion 1 of 110
During the contraction phase of the business cycle, which of the following typically occurs?
a.Gross domestic product rises for at least two consecutive quarters
b.Unemployment rises while business inventories tend to increase
c.Consumer spending accelerates and corporate profits expand
d.The central bank aggressively raises short-term interest rates
Explanation
A contraction is marked by falling output, rising unemployment, and weakening demand, which often leaves unsold goods and swelling inventories. Two consecutive quarters of rising GDP describe an expansion, not a contraction. Central banks generally cut rates during downturns to stimulate activity.
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