2.5.3: Trade (Business) Cycle

Question 1

What is a trade (business cycle)?

Answer 1

• Refers to the changes in real GDP that occur in economy over time

Question 2

What are the 4 stages in a trade cycle?

Answer 2

• Boom
• Recession
• Slump
• Recovery

Question 3

The characteristics of a recession

Answer 3

-Unemployment increases
- Inflation falls slightly (disinflation)
- Incomes drop
- Decreasing demand
- Decreasing confidence

Question 4

The characteristics of a slump

Answer 4

• Low unemployment
• Low demand
• Low investment
• Low consumer confidence

Question 5

The characteristics of a recovery

Answer 5

• Increasing employment
• Increasing demand
• Increasing investment
• Increasing confidence

Question 6

The characteristics of a boom

Answer 6

• High GDP
• Increase in imports
• Strong domestic currency
• High confidence
  -High investment
  -High demand
• High employment

Question 7

What is an economic boom?

Answer 7

• a period where there is high GDP and output in the economy

Question 8

What is a recession?

Answer 8

• a period of downturn in economic activity

Question 9

What is a recovery?

Answer 9

• when the economy is trying to get back to normal state after a slump/ recession

Question 10

What is a slump?

Answer 10

• a period of decline in economic activity

Question 11

What can cause a recession?

Answer 11

• A global financial crisis, e.g 2008, could cause a boom to turn into a recession
• Agricultural harvest
  -Trading Partners, eg a recession in the EU would cause exports to fall from the UK, which could trigger a change from slowdown to recession