Buisness Cycle

Question 1

What is the business cycle

Answer 1

Refers to the fluctuations in economic activity around a long term growth path.

Question 2

What is recession

Answer 2

Is defined by by economists as two successive falls in quarterly real domestic product. A negative GDP growth

Question 3

What is the normal quaterly rate growth in Australia

Answer 3

0.7 -0.8 percent. This equates to annual growth rate of 3%(four quarters in three years)

Question 4

One buisness cycle is measured

Answer 4

as the period of time between two troughs or two peaks

Question 5

If the actual GDP is above potential GDP….

Answer 5

The economy experiences a positive output gap and the unemployment rate will fall below 4 per cent - the natural rate of unemployment

Question 6

If actual GDP falls below potential GDP….

Answer 6

Then the economy experiences a negative output gap and the unemployment rate will rise above 4 per cent.

Question 7

What are the usual durations of expansions and contractions

Answer 7

Expansions will usually last up to 10 years while contractions are relatively brief, lasting for one or two quarters