Answer to Question #312573 in Macroeconomics for Zandria

Question

Changes in GDP are reflected in the business cycle, as well as the rate of inflation and the overall balance of payments situation. True or false

Answer 1

True

Along with GDP, a number of other economic indicators tend to alter as the economy progresses through the business cycle. Employment, incomes, industrial production, and sales all tend to rise in tandem with rising real GDP during an economic upswing.

Inflation is caused by GDP growth over time. This is because people will spend more money in a society where inflation is rising because they know it will be less valuable in the future. In the near run, this leads to higher GDP, which in turn leads to higher prices.