7. The Economic Cycle

Question 1

What are the different stages of the Economic Cycle in order?

Answer 1

Peak - Recession - Trough - Recovery - Peak

Question 2

What does the Economic Cycle show?

Answer 2

The recurring ups and downs experienced by Real GDP over time

Question 3

What is Economic Growth?

Answer 3

Economic activity is growing rapidly. Firms enjoy increased sales and profits, new businesses startup. Output, incomes and employment are all growing.

Question 4

What is an Economic Boom?

Answer 4

Demand, sales and profits peak. Inflation is on the increase prices rise due to demand exceeding supply.

Question 5

What is an Economic Recession?

Answer 5

Slow down in economic activity. Economic growth may even turn negative. Demand starts to fall, profits decline, production slows and firms make redundancies

Question 6

What is Economic Recovery?

Answer 6

Confidence starts to recover and spending on goods and services starts to increase.

The output is increased and sales and profits start to rise, therefore employing more workers.

Higher employment, therefore, boosts spending further as more people have incomes to spend

Question 7

What are the five sectors of the Circular Flow of Income?

Answer 7

Households, Firms, Government, Foreign Trade and Financial Institutions

Question 8

Describe the Circular Flow of Income.

Answer 8

Go search it up and memorise it Sam