GDP and Business Cycles

Question 1

Business cycle

Answer 1

Cycle or series of cycles of economic expansion and contraction. Type of fluctuations found in the aggregate activity of a nation. Alternating increasing and decreasing in economic activity.

Question 2

Four phases of the business cycle:

Answer 2

Peak, recession, trough and recovery

Question 3

Measurements of predicting movements in business cycles:

Answer 3

Chicago fed national activity index, the conference board leading economic index, the yield curve, the National Bureau Activity Index

Question 4

Who dates business cycles?

Answer 4

National Bureau of Economic Research. Date some time after the trough

Question 5

What does the circular flow diagram show?

Answer 5

Shows how households and firms interact through product and resource markets

Question 6

What does Chicago Fed National index include?

Answer 6

Production, income, unemployment, employment, hours worked, personal consumption, orders, inventories, housing, sales

Question 7

GDP

Answer 7

Monetary measure of the market value of all final goods and services produced in a specific time period by country. Can be be computed by adding spendings or income

Question 8

Personal consumption expenditures

Answer 8

The purchases of goods and services by individuals and business residents of the us

Question 9

Gross private domestic investment

Answer 9

Fixed investments such as structures, equipment and software

Question 10

Formula to calculate GDP

Answer 10

Consumption expenditure + investment expenditures + government purchases + (exports - imports)

Question 11

How can calculate GDP in another way?

Answer 11

Adding compensation to employees, proprietor’s income, rental income, cor-orate profit, net interest, statistical adjustments

Question 12

The National income and product accounts (nipa)

Answer 12

Set of economic accounts that provides measures of the value and composition of National output and the incomes generated in the production of that output. Allow economists to judge nation’s economic performance, compare income and output, track economy’s condition

Question 13

GDP per capita

Answer 13

Rough measure of a country’s standard of a country’s standard of living relative to others countries. Doesn’t reflect difference in income. Measured as dividing GDP to population

Question 14

Nominal GDP

Answer 14

Gdp given in current year prices without adjustments for inflation

Question 15

Real GDP

Answer 15

Measure of gdp that reflects the number of goods and services adjusted for inflation. Uses prices of the base year

Question 16

GDP-PPP purchasing power parity

Answer 16

GDP converted to dollars using purchasing power parity rates. Adjusted for cost of living relative to a base country

Question 17

Informal economy

Answer 17

Includes all market transactions that are not officially reported and then are not included in GDP market.

Question 18

Double-dip recession

Answer 18

A recession that begins after only a short period of economic recovery from the previous one.

Question 19

The leading economic index

Answer 19

Independent business and research association, another index that economists look when predicting movements in business cycle. Recession occurs if index falls 3 months in a row

Question 20

Yield curve

Answer 20

Shows the relationship between the interest rate earned on a bond (fixed income instrument that represents a loan made by an investor to a borrower (corporate or government) on the y-axis and the length of time until the bond’s maturity date (срок погашения) on the x-axis

Question 21

Treasury spread

Answer 21

Difference in interest rate between a long term bond and a short term bond. If the value is negative, short-term bills exceed those on long term bonds and it results in recession

Question 22

Compensation of employees

Answer 22

Wages, salaries and insurances

Question 23

Proprietor’s income

Answer 23

Current income of all sole proprietorships, tax-exemption cooperation in the country, rental income of farmhouses

Question 24

Net interest

Answer 24

Interest paid by businesses

Question 25

National income

Answer 25

All income, including compensation of employees, profits, rental income, net interest, taxes. Doesn’t include consumption of fixed capital and statistical disperancy

Question 26

Government spendings

Answer 26

Wages, salaries, purchases of products and services

Question 27

Fixed investment

Answer 27

Investment in structures, equipment and software

Question 28

Gross National product GNP

Answer 28

Reflects the market value of all final goods and services produced by the resources supplied by the US residents whether the goods produced abroad or domestically

Question 29

Intermediate goods

Answer 29

Long-used or used products

Question 30

What occurs in circular flow diagram?

Answer 30

Businesses sell products and buy resources, whereas households sell resources and buy products

Question 31

When recession can occur based on the Chicago Fed National index?

Answer 31

If index falls below -0.7