Understanding Business Cycles

Question 1

Say’s law

Answer 1

All that is produced will be sold because supply creates its own demand

Question 2

A price index created by holding the composition of the consumption basket constant is called a _________.

Answer 2

Laspeyres index

Question 3

The ______ index is the geometric mean of the Laspeyres index and the _______ index is an index formula using the current composition of the basket.

Answer 3

Fisher, Paasche

Question 4

The____ for the United
States covers only urban areas using a household survey, which is why it is called the ______. On the other hand, the _____________ price
index covers all personal consumption in the United States using business surveys.

Answer 4

CPI,CPI-U, personal consumption expenditures (PCE)

Question 5

Core inflation usually refers to the

inflation rate calculated based on a price index of goods and services except ____________.

Answer 5

food and

energy

Question 6

Economists describe two types of inflation: ________ , in which rising costs, usually wages, compel businesses to raise prices generally; and __________, in which
increasing demand raise prices generally, which then are reflected in a business’s costs
as workers demand wage hikes to catch up with the rising cost of living

Answer 6

cost-push, demand-pull

Question 7

unit labor cost (ULC)

Answer 7

ULC = W/O

Question 8

The _________ has 10 component parts that run
the gamut from orders for capital goods, to changes in consumer expectations, to
swings in stock prices. S

Answer 8

Index of Leading Economic Indicators (LEI)

Question 9

The Austrian economic school attributes the primary cause of the business
cycle to:
A misguided government intervention
B the creative destruction of technological progress.
C sticky price and wage expectations that exaggerate trends.

Answer 9

A