ACCA Applied Knowledge · Business and Technology · Macroeconomic factors
In which phase of the business cycle would a business typically expect rising unemployment, falling consumer demand and reduced investment, with output declining for two consecutive quarters?
This describes a recession. Real output falls for two successive quarters, which leads to weaker consumer demand, lower business investment and rising unemployment. Boom, peak and recovery phases are characterised by rising or high output rather than a sustained decline.
- ARecessionCorrect
- BBoom
- CEarly recovery
- DPeak of the expansion
Explanation
A recession is conventionally identified by falling real GDP for two consecutive quarters, accompanied by rising unemployment, weak demand and reduced investment. A boom and the peak involve strong demand and high output, and early recovery involves output beginning to rise again.
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