Business Cycle

Question 1

Definition of cycle

Answer 1

A cycle is a process that is repeated

Business or economic activity moves in cycle

Question 2

What is GDP

Answer 2

GDP is the dollar value of all final goods and services in a economy

Question 3

The full name of GDP

Answer 3

Gross domestic product

Question 4

The equation of GDP

Answer 4

GDP =C+I+G +(X-M)

Question 5

What does each letter stand for?

Answer 5

C-consumption 
I-investment (business)
G-government 
X-export 
M-import

Question 6

What will change in the GDP equation when the economy is recession

Answer 6

The value of C and I will decrease

Question 7

What will change in the GDP equation when the economy is in boom period

Answer 7

The value of C and I will increase

Question 8

What the downturn means in the cycle ?

Answer 8

Falling GDP growth

Question 9

What’s the effect to labour when it’s in downturn?

Answer 9

Increasing savings-consumers are less prepared to spend. They may be choosing to pay down previous debt

Less consumption-the direct result of more saving is less spending

Question 10

What’s the effect to company when it’s in downturn?

Answer 10

Increased stock- as consumers buy less ,business remain full of unsold goods and services.

Lower order for new/replacement goods-business identify that sales are slowing so they reduce orders and are often forced to discount existing stock to clear it

Question 11

What’s the effect to manufacture when it’s in downturn?

Answer 11

Lower orders force manufacturers to cut back production

Lower production leads to manufacturers reassessing their production schedule and resource planning

Lower resource requirements may be expressed as the lower need for labour

Employment begins to fall meaning that who have lost their job must cut back further on expenditures . Others who still have a job , see that the unemployment become a possibility for them too,they try to same more ,just in case.

Question 12

What’s the effect to back when it’s in downturn?

Answer 12

Credit contract - there is often lower leading those who have borrow previously pay down their loans. Banks are less eager to lend money to

Business-because they can see that demand is falling and more business are likely to fail

Consumers- because employment is falling and there is more likelihood that people lose their jobs

Question 13

The cycle continues until?

Answer 13

The economy moves from growing at a falling rate to contracting

Question 14

What is recession

Answer 14

The period where economics contract are called recession

Question 15

What is the recession in Australia

Answer 15

In Australia, a recession is a decline in real GDP for two consecutive quarters (6 months)

Question 16

Why does government involve itself in the business cycle

Answer 16

Because one of the most powerful policy goals of government is economic growth

Question 17

2 primary interventions of government used?

Answer 17

Fiscal policy

Monetary policy

Question 18

What is fiscal policy described?

Answer 18

Fiscal policy is described within a document budget and in most countries the fiscal policy is announced once a year

Question 19

The basic form of budget

Answer 19

Deficit budget-
government spending > taxation revenue

Balance budget
Government spending =taxation revenue

Surplus budget
Government spending < taxation revenue

Question 20

What is fiscal policy

Answer 20

Fiscal policy ( government spending + taxation)
Fiscal policy is the use of government spending and taxation to achieve policy goals

Question 21

What is monetary policy

Answer 21

Monetary policy is the intervention by government authorities in money markets to control the supply of money with the objective
Of achieving policy goals

Question 22

What is relationship between the interests rate and different period of economic

Answer 22

Recession-low interest rate
In order to encourage people borrow more money

Boom-high interest rate
In order to slow down the growth of economy

Question 23

Demand

Answer 23

The willingness and ability of consumers to purchases goods and services

Question 24

Supply

Answer 24

The willingness and ability of businesses to offer goods and services for sale

Question 25

Downturn

Answer 25

A decline in economic activity

Question 26

Upturn

Answer 26

An increase in economic activity

Question 27

Consumption

Answer 27

Purchasing and using goods and services

Question 28

Save

Answer 28

To put money aside to spend in the future

Question 29

Balance of payments

Answer 29

The difference between the funds a country receives and those it pays for all international transaction

Question 30

Gross domestic product

Answer 30

The total market value of all the goods and services produced in a country during a given period of time

Question 31

Equilibrium

Answer 31

A state of balance,for example when supply is the same as demand

Question 32

Deficit

Answer 32

An amount of money that is smaller than is needed

When spending exceeds revenue

Question 33

Surplus

Answer 33

An excess “a quantity that is large than is needed “

Question 34

Fiscal policy

Answer 34

Government actions concerning taxation and policy expenditure

Question 35

Monetary policy

Answer 35

Government or central bank actions concerning the rate of growth of the money in circulation

Question 36

Money supply

Answer 36

The total amount available in an economy at a particular time

Question 37

Keynesianism

Answer 37

The economic theory that government monetary and fiscal policy should stimulate business activity and increase employment in a recession.

Question 38

The symmetry 
Boost 
Decrease
Depression 
Excess
Expand 
Expenditure
Recovery 
Output

Answer 38

Stimulate 
Reduce 
Slump 
Surplus 
Growth 
Spending 
Upturn 
Production

Question 39

Opposites
Boom
Contract 
Demand 
Endogenous 
Save
Peak

Answer 39

Depression 
Expand 
Supply 
Exogenous spend 
Though