One phase of the business cycle is the expansion phase. This phase is

Question

One phase of the business cycle is the expansion phase. This phase is a twofold one, including recovery and prosperity. During the recovery period there is ever-growing expansion of existing facilities, and new facilities for production are created. More businesses are created and older ones expanded. Improvements of various kinds are made.  There is an ever-increasing optimism about the future of economic growth.  Much capital is invested in machinery or “heavy” industry. More labor is employed. More materials are required. As one part of the economy develops, other parts are affected. For example, a great expansion in automobiles results in an expansion of the steel, glass, and rubber industries. Roads are required; thus the cement and machinery industries are stimulated. Demand for labor and materials results in greater prosperity for workers and suppliers of raw materials, including farmers. This increases purchasing power and the volume of goods bought and sold. Thus, prosperity is diffused among the various segments of the population. This prosperity period may continue to rise and rise without an apparent end. However, a time comes when this phase reaches a peak and stops spiraling upwards. This is the end of the expansion phase.    1 
 1. Which of the following statements best exemplifies the optimism mentioned in the  Highlighted  sentence of the passage as being part of the expansion phase?

A. Public funds are designated for the construction of new highways designed to stimulate tourism.
B. Industrial firms allocate monies for the purchase of machine tools.
C. The prices of agricultural commodities are increased at the producer level.
D. Full employment is achieved at all levels of the economy.
E. As technology advances, innovative businesses replace antiquated firms.

2  
 2. It can be inferred from the passage that the author believes that

A. when consumers lose their confidence in the market, a recession follows
B. cyclical ends to business expansion are normal
C. luxury goods such as jewelry are unaffected by industrial expansion 
D. with sound economic policies, prosperity can become a fixed pattern
E. the creation of new products is essential for prosperity

3  
 3. Which of the following statements would be most likely to begin the paragraph immediately following the passage?

A. Union demands may also have an effect on business cycles.
B. Some industries are, by their very nature, cyclical, having regular phases of expansion and recession.
C. Information is a factor that must be taken into consideration in any discussion of the expansion phase.
D. The farmer’s role during the expansion phase is of vital importance.
E. The other phase of the business cycle is called the recession phase.

Sajjad1994 · Answer

OE

1. Which of the following statements best exemplifies the optimism mentioned in the  Highlighted  sentence of the passage as being part of the expansion phase?

Take a close look at the sentences that immediately precede and follow the boldfaced sentence. What do they discuss? They talk about changes in business, in the facilities for production, in investments in  “machinery or ‘heavy’ industry.”  These changes reflect business owners’ optimism about the future of economic growth. If the owners of industrial firms were not optimistic that their businesses were going to grow, they would be unwilling to invest money in purchasing new equipment.

The correct answer is Choice B.

Sajjad1994 · Answer

OE

2. It can be inferred from the passage that the author believes that

To the author, it is no big deal that an end comes to the business cycle’s expansion phase. He describes the end of the prosperity cycle in a matter-of-fact manner:  “a time comes when this phase reaches a peak and stops spiraling upwards.”  To him,  cyclical ends to business expansion are normal.

Use the process of elimination to make sure you have come up with the correct answer. Does the author believe that when consumers lose their confidence in the market, a recession follows? There is no evidence to support this statement: the passage never even mentions recessions or consumer loss of confidence. You can eliminate  Choice A.

Does the author believe that luxury goods such as jewelry are unaffected by industrial expansion? While the author discusses industrial expansion, he never mentions luxury goods. You can eliminate  Choice C.

Does the author believe that with sound economic policies, prosperity can become a fixed pattern? Definitely not. He states that a time comes when the prosperity period stops spiraling upwards; rather than becoming a fixed pattern, prosperity comes to an end. You can eliminate  Choice D.

Does the author believe that the creation of new products is essential for prosperity? Most likely not. He doesn’t talk about new products; he certainly never asserts that their creation is essential for prosperity. You can eliminate  Choice E . Only  Choice B  is left. It is the correct answer. 
 
  Answer: B

Sajjad1994 · Answer

OE

What is the topic of this passage? It is the business cycle’s expansion phase. From the passage’s opening sentence (“One phase of the business cycle is the expansion phase.”) to its concluding sentence (“This is the end of the expansion phase.”), the author has been describing this one phase. By definition, a phase is one stage in a process of change or development. The business cycle therefore must consist of more than one phase. Thus, it is likely that the paragraph immediately following a description of the business cycle’s expansion phase would describe a different phase of the business cycle.  Choice E ,  The other phase of the business cycle is called the recession phase , is a likely introductory sentence for such a paragraph. 
 
  Answer: E

One phase of the business cycle is the expansion phase. This phase is

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