Which of the following is most likely to lead to an expansion in the business cycle?

• A. A reduction in exports
• B. A rise in unemployment rates
• C. A decrease in government investment
• D. An increase in consumer spending

Answer: (D)

Verified step by step guidance

1. Understand the concept of the business cycle, which refers to the fluctuations in economic activity over time, including periods of expansion (growth) and contraction (recession).
2. Recognize that an expansion in the business cycle means an increase in overall economic activity, such as higher output, employment, and income.
3. Analyze each option to determine its likely effect on economic activity: a reduction in exports typically decreases demand for domestic goods, leading to contraction; a rise in unemployment reduces income and spending, also causing contraction; a decrease in government investment lowers aggregate demand, again causing contraction.
4. Identify that an increase in consumer spending raises aggregate demand, which stimulates production and employment, thereby promoting economic expansion.
5. Conclude that among the options, an increase in consumer spending is most likely to lead to an expansion in the business cycle because it directly boosts demand and economic growth.