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Chapter 6: Q. 24 (page 161)

Why do you think that GDP does not grow at a

steady rate, but rather speeds up and slows down?

Short Answer

Expert verified

GDP does not grow at the same rate every year. Because of the business cycle's oscillations, this is the case.

Step by step solution

01

Business cycle

A business cycle is the periodic development and contraction of a country's economy, as measured largely by GDP. Governments seek to affect business cycles by modifying interest rates, increasing or decreasing spending, and raising or lowering taxes.

02

Explanation

GDP does not rise at the same pace every year. Because of the business cycle's oscillations. GDP increases quicker during a boom because the economy's output is high and consumers are prepared to spend more. During booms, unemployment is at a minimum. Furthermore, during a boom, demand for products and services is high, resulting in salary increases.

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