2.5.3 Trade (Business) Cycle

Question 1

what is the trade cycle, what is it measuerd by

what are the 4 key phases

Answer 1

-the trade cycle is the periodic but irregular up and down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.

-the 4 key phases are boom, trough, recession(slump) and recovery

Question 2

what are the 6 characteristics of a boom

Answer 2

-high national income
-economy is likely to be working above the PPF, so there is a positive output gap
-consumption and investment tend to be high
-tax revenue increases
-imports usually increases to meet the demand that domestic suppliers cannot demand
-there is high inflationary pressure

Question 3

what are the 5 characteristics of a recession

Answer 3

-high unemployment
-low consumption,investment and imports
-low inflationary pressure
-government budget worsesn due to an increase in spending on welfare/transfer payments
-a fall in real GDP for at least 2 successive quarters