Which of the Following Schematics Most Accurately Represents Economic Fluctuations

question 81

Multiple Choice

Which of the following schematics most accurately represents economic fluctuations during a business cycle?

• A) Shock → Spending response by households and firms → Multiplier effect → Change in real GDP
• B) Shock → Multiplier effect → Spending response by households and firms → Change in real GDP
• C) Shock → Multiplier effect → Change in real GDP → Spending response by households and firms
• D) Shock → Change in real GDP → Spending response by households and firms → Multiplier effect

---

Definitions:

Dependent Variable

A variable that changes as a consequence of a change in some other (independent) variable; the “effect” or outcome.

Interest Rate

The interest rate is the percentage charged on the total amount borrowed or earned, representing the cost of borrowing money or the reward for saving.

Investment

The act of allocating resources, usually financial, into something with the expectation of generating income or profit.

Tabular Presentation

A method of presenting information or data in rows and columns, making it easier to understand and analyze.