unit 4: business cycle

Question 1

Business cycle?

Answer 1

a period of macroeconomic expansion followed by a period of macroeconomic contraction (changes in real gdp above or below normal levels)

Question 2

a typical business cycle consists of…

Answer 2

expansion, contraction, trough, peak

Question 3

1. expansion (business cycle)

Answer 3

a period of economic growth as measured by a rise in real GDP (spending up, employment up, production up, output up, sales up, income up, inflation up)

Question 4

economic growth (business cycle)

Answer 4

a steady, long-term increase in real GDP

Question 5

2. peak (business cycle)

Answer 5

the height of an economic expansion, when real GDP stops rising (inflation at highest point, 6-8%)

Question 6

3. contraction (business cycle)

Answer 6

a period of economic decline marked by falling real GDP (output down, spending down, employment down, production down, income down, inflation may stop)

Question 7

depression

Answer 7

a recession that is especially long and severe (occurs during trough)

Question 8

4. recession (business cycle)

Answer 8

a prolonged economic contraction (unemployment at 6% to 10%, lasting 6 to 18 months)

Question 9

5. trough (business cycle)

Answer 9

the lowest point of an economic contraction, when real GDP stops falling

Question 10

stagnation

Answer 10

a decline in real GDP combined with a rise in the price level

Question 11

What factors effect business cycle?

Answer 11

1. business investment
2. interest rates (cost of credit) & credit, % is up consumers and businesses spend less, OR % is down consumers and businesses spend more
3. consumer expectations (still having a job vs. not having a job in the future)
4. external shocks (technology ai, wars, natural factors, droughts, hurricanes)