2.7: Business Cycle

Question 1

The Business Cycle

Answer 1

the idea that the economy had a line that can determine the economy’s GDP over time

Question 2

Peak

Answer 2

unemployment low, spending & confidence high,

Question 3

What comes after a peak?

Answer 3

Recession, unemployment goes up and spending falls,

Question 4

Trough

Answer 4

the lowest the GDP

Question 5

What happens after a trough?

Answer 5

The economy recovery

Question 6

Does a trough mean recession?

Answer 6

No

Question 7

What is negative output gap

Answer 7

unemployment high, economy sluggish

Question 8

What is a positive output gap?

Answer 8

economy is expanding quickly, a lot of spending, a lot of inflation, econ overheating

Question 9

What is wrong with looking at the economy in the business cycle?

Answer 9

Doesn’t reflect the human cost of economic downturn
It suggests the economy fluctuates consistently, and predictable