QuestionJune 18, 2025

The economy experiences an expansionary phase in the business cycle, what happens to output and price levels? Output increases and price levels decrease. Output increases and price levels increase. Output decreases and price levels decrease. Output decreases and price levels increase.

The economy experiences an expansionary phase in the business cycle, what happens to output and price levels? Output increases and price levels decrease. Output increases and price levels increase. Output decreases and price levels decrease. Output decreases and price levels increase.
The economy experiences an expansionary phase in the business cycle, what happens to
output and price levels?
Output increases and price levels decrease.
Output increases and price levels increase.
Output decreases and price levels decrease.
Output decreases and price levels increase.

Solution
4.1(283 votes)

Answer

Output increases and price levels increase. Explanation 1. Identify the effects of an expansionary phase During an expansionary phase, economic activity increases, leading to higher demand for goods and services. 2. Determine the impact on output Higher demand typically results in increased production to meet consumer needs, thus increasing output. 3. Determine the impact on price levels Increased demand can lead to higher prices as consumers are willing to pay more, causing price levels to rise.

Explanation

1. Identify the effects of an expansionary phase<br /> During an expansionary phase, economic activity increases, leading to higher demand for goods and services.<br /><br />2. Determine the impact on output<br /> Higher demand typically results in increased production to meet consumer needs, thus increasing output.<br /><br />3. Determine the impact on price levels<br /> Increased demand can lead to higher prices as consumers are willing to pay more, causing price levels to rise.
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