What characterizes a "business cycle"?

• A. Steady economic growth without fluctuations
• B. Fluctuations in economic activity
• C. Consistent low unemployment rates
• D. Uniform product pricing across markets

Answer: (B)

A business cycle is characterized by fluctuations in economic activity over time, which typically includes periods of expansion (when the economy grows) and contraction (when the economy shrinks). These fluctuations occur in cumulative economic indicators such as GDP, employment levels, and production output. During an expansion, economic activity increases, leading to more jobs, higher consumer spending, and greater overall economic growth. Conversely, during a contraction, businesses may produce less, leading to layoffs, decreased consumer confidence, and a slowdown in spending.

Understanding the business cycle is crucial, as it helps economists, investors, and policymakers to anticipate and respond to economic changes. The other options describe stable economic conditions or certain specific metrics (like unemployment rates or pricing uniformity) which do not capture the essence of the cyclical nature of economic activity inherent in a business cycle.