2.5 Economic growth • 2.5.3 Trade (business) cycle

Question 1

The business cycle…

Answer 1

This refers to the stage of economic growth that the economy is in

Question 2

What happens in the recovery stage

Answer 2

Real output increases when there are periods of economic growth. This is the
recovery stage

Question 3

The boom in the business cycle is….

Answer 3

The boom is when economic growth is fast, and it could be inflationary or
unsustainable

Question 4

In relation to business cycle,state what may happen in a recession

Answer 4

During recessions, the real output in the economy falls, and there is negative economic growth.

Question 5

How may the government help a recession in the business cycle

Answer 5

During recessions, governments might increase spending to try and stimulate
the economy. This could involve spending on welfare payments to help
people who have lost their jobs, or cutting taxes.

Question 6

o During periods of economic growth, governments may receive more tax
revenue since consumers will be spending more and earning more. They may
decide to spend less, since the economy does not need stimulating, and
fewer people will be claiming benefits.

Question 6

Government spending during periods of economic growth?

Answer 6

During periods of economic growth, governments may receive more tax revenue since consumers will be spending more and earning more. They may decide to spend less, since the economy does not need stimulating, and fewer people will be claiming benefits.

Question 7

Characteristics of a boom in the trade cycle

Answer 7

High rates of economic growth
Near full capacity or positive output gaps
(Near) full employment
Demand-pull inflation