CFA Level I · CFA Level I Exam · Understanding Business Cycles
Late in an expansion, an economy is most likely to show:
Late in an expansion the labor market is tight, so wage growth accelerates and unemployment sits near its cycle low. Inflation pressure builds as resources are fully used. Rising unemployment with falling inflation fits a downturn, not the late expansion.
- Arising unemployment and falling inflation
- Baccelerating wage growth and a falling unemployment rate near its lowest levelCorrect
- Crising inventory-to-sales ratios because of weak demand and shrinking credit
Explanation
Late in an expansion, labor markets are tight, so unemployment is low and wage pressure and inflation rise. Rising unemployment with falling inflation fits a contraction or early recession.
Did you get it right without looking?
One question tells you little. A timed set on Understanding Business Cycles shows your real accuracy, how long you take and where you lose marks.
More Understanding Business Cycles questions
- An economist observes that the unemployment duration average and the ratio of consumer credit to personal income are both rising sharply, wh…
- A consumer price index basket cost 400 in the base year. The current cost of the same fixed basket is 436, and a year ago it cost 418. The i…
- An economist argues that business cycles arise mainly because firms and households react to random changes in technology, and that output fl…
- Which of the following conditions is most likely to be observed in the late stage of an economic expansion, close to the peak?
- Early in a recovery from a recession, firms with ample spare capacity face rising demand. Which response is most likely?
- Which set of conditions is most likely to be observed near the peak of a business cycle?