CA Foundation · Business Economics · Business Cycles
A statistician measures the business cycle by taking the time between two successive peaks of real GDP. What does this measure give?
The time between two successive peaks (or troughs) measures the duration or length of the business cycle. Amplitude is different, since it measures the vertical distance between peak and trough in output, not the time taken.
- AThe amplitude of the cycle
- BThe duration or length of the cycleCorrect
- CThe severity of the recession only
- DThe trend growth rate of the economy
Explanation
Time elapsed from one peak to the next peak (or trough to trough) is the length or duration of a cycle. Amplitude is the vertical size of the fluctuation, i.e. the difference between peak and trough levels, so it is not measured by time.
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