QAEconomics › A government can try to minimize business cycles by:
Q

A government can try to minimize business cycles by:

a. promoting growth during the contractionary phase of the business cycle.

b. disregarding new technologies during the contractionary phase of the business cycle.

c. promoting growth during the expansionary phase of the business cycle.

d. increasing the money supply during the expansionary phase of the business cycle.

A

Answer: d. increasing the money supply during the expansionary phase of the business cycle.

The government can try to minimize business cycles by increasing the money supply during the expansionary phase of the business cycle.

A business cycle refers to the total movement of the economy and its activities in an upward and downward fashion (increasing and decreasing), over a period of time. It has four phases: the expansion, peak, contraction, and trough phases.

The expansion phase is characterized by rapid growth, increased production, low interest rates, and higher inflation. This is the best phase to take action to ensure that business cycles do not repeat.

At the peak period, economic growth has reached its highest point, and the economy becomes destabilized.

The contraction period is depicted by slowed economic growth, and gives rise to the trough phase, the lowest phase of the economy, right before growth resumes.

3 years ago
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