The Phase of the Business Cycle in Which Output Is

question 56

Multiple Choice

The phase of the business cycle in which output is lowest relative to its potential level is the

• A) peak.
• B) trough.
• C) recession.
• D) expansion.
• E) trend.

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Definitions:

Compounded

The process of generating earnings from previous earnings, calculated by applying the earnings rate not only to the principal but also to the accumulated earnings over past periods.

Compounds Semi-Annually

Interest on an investment or loan is calculated and added to the principal balance twice a year.

Compounds Monthly

Refers to the process of applying interest to an amount where the interest earned itself earns interest, recalculated on a monthly basis.

Effective Annual Rate

A measure of the annual return on an investment, taking into account the effect of compounding interest.