Business Cycle – AP Macroeconomics

1. A recession is defined as:

One quarter of negative GDP growth Two consecutive quarters of declining real GDP Unemployment above 10% Inflation above 5%

2. At the trough of the business cycle:

GDP is at its maximum Unemployment is at its lowest GDP is at its minimum, recovery begins Inflation is highest

3. During an expansion, the appropriate fiscal policy is:

Increase government spending Cut taxes Contractionary (reduce spending or raise taxes) No action needed