1. Key facts about economic fluctuations

The following graph approximates business cycles in the United States from the first quarter of 1955 to the third quarter of 1959. The vertical blue bar coincides with periods of 6 or more months of declining real gross domestic product (real GDP).

1955

1956

1957

1958

1959

2800

2700

2600

2500

2400

REAL GDP (Billions of dollars)

YEAR

Source: "Current-dollar and Real GDP," Bureau of Economics Analysis, last modified May 1, 13, accessed May 15, 13, http://www.bea.gov/national/xls/gdplev.xls.

Notice that real GDP trends upward over time but experiences ups and downs in the short run. These short-run fluctuations in real GDP are often referred to as .

True or False: Small ups and downs in real GDP follow a consistent, predictable pattern.

True

False

Which of the following probably occurred as the U.S. economy experienced increasing real GDP in 1958?Check all that apply.

Consumer spending increased.

The unemployment rate declined.

Retail sales increased.

Home sales declined.