When the economy reaches a trough in a business cycle, which of the following will occur?
A) Income, production, and employment will continue to fall.
B) Income, production, and employment will begin to rise.
C) Income and production will rise, but employment will continue to fall.
D) Employment rises, but income and production will continue to fall.
Answer: B
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The larger the marginal propensity to consume
A) the smaller the multiplier is. B) the larger the multiplier is. C) the smaller autonomous consumption is. D) the larger the marginal propensity to save is.
The Q-theory of investment
A) suggests that a downturn in real GDP will lead to a sharp fall in investment, which leads to further reductions in GDP through the multiplier. B) emphasizes the role of real interest rates and taxes. C) emphasizes that current investment spending depends positively on the expected future growth of GDP. D) links investment spending to stock prices.