2.5 The Economic Cycle

Question 1

Characteristics of a BOOM in the economic cycle

Answer 1

-High rates of economic growth
-Positive output gaps
-Near full employment
-More confidence
-Gov budgets improve

Question 2

Characteristics of a recession in the economic cycle

Answer 2

-Negative economic growth over 2 consecutive
-Low inflation rates
-Lower Gov budgets
-Less confidence

Question 3

The circular flow of income diagram

Answer 3

The circular flow of income is an economic model that shows how money, goods, and services move between households and firms in an economy.

Question 4

What factors influence Aggregate demand

Answer 4

-Consumer spending
-Capital investment
-Gov spending
-Exports-imports

Question 5

What factors influence Aggregate supply

Answer 5

-Cost of employment
-Gov regulation or intervention
-Brain drain
-Fall in business capital spending

Question 6

What is underemployment

Answer 6

Those who have jobs, but the labour is not used to its full potential

Question 7

How can we measure unemployment

Answer 7

-Claimant count
-International labour organisation ILO
-UK labour force survey LFS

Question 8

What are the causes of unemployment

Answer 8

-Geographical immobility
-Occupational immobility
-Flexibility of labour market

Question 9

What is structural unemployment

Answer 9

Occurs with along term decline in demand for its goods and services in an industry

Question 10

What is cyclical unemployment

Answer 10

Caused by a lack of demand for goods and services