Chapter 14- Section 1 Flashcards Preview

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Flashcards in Chapter 14- Section 1 Deck (18):
0

What is the difference between a recession and a depression?

A recession can last for six months, but a depression lasts longer with a large number of people out of work, shortages, and excess capacity in factories

1

Why did the government declare a "bank holiday" in 1933?

To prevent panic withdrawals

2

How did easy and plentiful credit contribute to the Great Depression?

Many people borrowed heavily, made them vulnerable to credit contractions, high interest rates, and minor business fluctuations

3

When do businesses invest heavily in capital goods?

When the economy is expanding

4

What is an inventory adjustment?

Changes in the level of business inventories

5

What does an innovation usually trigger in industry?

Other businesses try to keep up with the innovation it leads to a big investment

6

What happens when the Fed allows an easy money policy?

Interest rates are low and loans are easy to get it encourages private sectors to borrow

7

Give an example of a positive and negative external shock

A positive external shock was when the British discovered oil. A negative external shock is when the US had high oil prices.

8

What is an Econometric model?

A macro economic model that uses algebraic equations to describe how the economy behaves

9

What is the index of leading indicators?

It's an indicator that turns to them before the real GDP turns down and goes up before the real GDP goes up

10

A period during which real GDP declines for two quarters in a row, or six consecutive months

Recession

11

The point where real GDP stops going up

Peak

12

The turnaround point where the real GDP stops going down

Trough

13

A period of recovery from a recession

Expansion

14

If a period of recession and expansion did not occur, the economy would follow a steady growth path called what?

A trend line

15

When towns, counties, chambers of commerce, and other civic bodies resorted to printing their own money

Depression scrip

16

Changes in capital expenditures are one cause of business cycles

When the economy is expanding businesses expect future sales to be high so they invest heavily in capital goods

17

Inventory adjustments, or changes in the level of business inventories, are a second possible cause of business cycles

Some businesses cutback on inventories at the first sign of an economic slowdown and then build them back up again at the first sign of the upturn