Interpreting Economic Growth Rate Trends

Steps:

• Examine the diagram for the growth rate pattern across years 1–5.
• Note that positive growth rates indicate rising output, while the peak rate suggests maximum expansion.
• Compare cumulative output implications: highest growth in year 5 leads to the largest overall output by then.
• Rule out options by checking against diagram peaks and troughs.

Why C is correct:

• Economic growth rate measures percentage change in real GDP; the highest rate in year 5 implies output reached its maximum level by the end of that period, per the diagram's trend.

Why the others are wrong:

• A: Growth rate may have been positive in year 3, so output did not fall throughout.
• B: Diagram shows lower output in year 1 compared to later years.
• D: Year 4 shows higher output than earlier troughs, not the lowest.

Final answer: C