4

Question 1

business cycle phases

Answer 1

EPCTR - expansion-peak-contraction-trough-recovery

Question 2

leading indicators

Answer 2

leading indicators change before economy changes. examples: housing starts; manufacturers’ new orders; commodity prices; avg hours worked per week; stock prices; money supply (indicative of available liquidity… drives interest rates)

Question 3

lagging indicators

Answer 3

lagging indicators change after economy changes.

examples: unemployment; inflation rate; labour costs; private sector PPE spending; business loans and interest on them

Question 4

coincident indicators

Answer 4

coincident indicators change with direction of economy,

examples: personal income; GDP; retail sales; industrial production

Question 5

expansion

Answer 5

inflation stable
corporate profits rising
unemployment steady or falling
stock markets strong
business start-ups>bankruptcies

Question 6

peak

Answer 6

inflation rises (wages increase)
interest rates rise/bond prices fall
stock prices fall

Question 7

contraction

Answer 7

GDP decreases
employment falls (reducing confidence and personal income)
bankruptcies>business start-ups

Question 8

trough

Answer 8

inflation falls
interest rates rise/bond prices rally
stock prices rally

Question 9

recovery

Answer 9

inflation may fall
unemployment still high
inventories shrunk during contraction must be built up