The Short-Run Fluctuations in Economic Activity That Can Cause Output

question 39

Multiple Choice

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called

• A) business cycles.
• B) economic contractions.
• C) economic expansions.
• D) economic peaks.
• E) economic troughs.

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Definitions:

Budget Line

A visual diagram showing every pairing of two items that a person can purchase within their budget constraints, based on their earning and the cost of these products.

Consumption Bundles

These are combinations of different goods and services that an individual consumes, representing a mix of choices according to their preferences and budget.

Income

Earnings received by individuals or entities, typically in the form of wages, salaries, rents, interest, or profits, available for spending or saving.

Substitution Effect

The shift in buying habits caused by a change in the relative costs of products, prompting consumers to substitute pricier options with more affordable ones.