In the United States, business cycles have occurred against a backdrop of a long-run trend of:

• A. declining real GDP
• B. constant unemployment rates
• C. rising real GDP
• D. stable price levels

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of business cycles. Business cycles refer to the fluctuations in economic activity characterized by periods of expansion and contraction in real GDP around a long-run trend.
2. Step 2: Identify the long-run trend in the U.S. economy. Historically, the U.S. economy has experienced growth over time, meaning that real GDP tends to increase in the long run despite short-term fluctuations.
3. Step 3: Analyze each option in the context of the long-run trend: declining real GDP would imply a shrinking economy over time, which contradicts historical data; constant unemployment rates are unlikely due to cyclical changes; stable price levels are rare due to inflation and deflation dynamics.
4. Step 4: Recognize that the correct long-run trend is rising real GDP, which means that despite business cycles, the overall economy grows over time.
5. Step 5: Conclude that business cycles occur around this upward trend in real GDP, reflecting expansions and recessions but not reversing the long-term growth path.