During an expansion in the business cycle, we would expect _____.

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During a expansion phase of the business cycle, overall economic activity increases. This typically leads to more production and lower unemployment as firms hire more workers to meet higher demand.
Option 1: 'inflation to rise and unemployment to fall' aligns with the common expectations of expansion. Higher demand and greater output can put upward pressure on prices (inflation) while unemployment decreases as hiring picks up. This option matches standard macroeconomic intuition for an expanding economy.
Option 2: 'unemployment to rise and production to fall' describes a contractionary scenario, not an expansion. In expansion, unemployment tends to fall and production tends to rise, making this option inconsistent with the expansion phase.
Option 3: 'any of these potential outcomes' is incorrect because expansions do not produce all these divergent outcomes simultaneously. The characteristic pattern is rising production with falling unemployment, and often rising inflation, not the other combinations.
Option 4: 'production to rise and inflation to fall' suggests rising output but falling prices, which is atypical in an expansion. Demand-side pressures and higher utilization of resources commonly push prices up rather than down, so this option is unlikely in a typical expansion.
In summary, option 1 best reflects the expected relationship between unemployment and inflation during an expansion, while the other options describe conditions that do not fit the standard expansion narrative.

ECON 2002.01 SP2025 (25230) Quiz 2

During an expansion in the business cycle, we would expect _____.

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ECON 2002.01 SP2025 (25230) Quiz 2

During an expansion in the business cycle, we would expect _____.

View Explanation

Log in for full answers

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