SIE Exam Question 394: Answer and Explanation

Question: 394

The US economy has traditionally performed in a way described by economists and analysts as the business cycle. When an economy that has been operating a peak efficiency begins to slow down, which phase of the cycle is the economy entering?

• A. contraction
• B. recovery
• C. expansion
• D. trough

Correct Answer: A

Explanation:

A: Slowdown in the economy implies the economy is contracting, beginning to 'shrink.'