SIE Exam Question 71: Answer and Explanation

Question: 71

When considering the four stages of an economic business cycle, which of the following are characteristics of the expansion stage?

I. Decline in savings

II. Real estate prices on the rise

III. An increase in gross domestic product (GDP)

IV. Rise in inventories

• A. II, III, and IV
• B. III only
• C. II and III
• D. I, II, and III

Correct Answer: C

Explanation:

With regards to the stages of an economic business cycle, the expansion stage would be characterized by a rise in real estate prices and an increase in gross domestic product (GDP). A decline in the amount and rate of savings and a rise in inventories would be characteristics of the contraction stage.