Business Cycle Flashcards
What is the business cycle?
A model showing increasing and decreasing in a nations real GDP orver time.
What is an upswing/expantion?
A general increase in economic activity
What is a downswing/contraction?
A general decline in economic activity
What is a trend line?
Shows general direction of the economy
What is a recession?
When there is negative economic growth for over three consecutive quarters.
What is a depression?
A sever prolonged downturn in economic activity lasting more than 3 years.
What is a recovery?
A period of renewed economic activity
What is a trough?
The lowest point of economic activity.
What is a peak?
The highest point in economic activity.
What is the length of the business cycle?
Measured from peak to peak and trough to trough.
What is the Amplitude?
Indicated the difference between peak and trough.
What is extrapolation?
Predicts the future by using past data.
What is the period of Recovery?
It is a period of renewed economic growth with more jobs created and a production increase and consumers spending more.
What is the period of prosperity?
There is optimism in economy and employment rises along with consumer spending as wages.salaries rise as well. It is the peak of activity but it leads to inflation and leads into a recession.
What is the period or recession?
It is negetive economic growth over two quarters with Jobs lost and employment drops from decreases in economic activity.
What is the period of Depression?
When money is short supply and has negative impact on investments and there is competition for jobs and cost of production decreases. It leads to foreign increasing foreign trade making its’s way back into a recovery.
What are exogenous reasons?
Factors from outside economy.
What are endogenous reasons?
Factors from within economy.
What are leading factors?
Changes in direction before economy.
What are coincidental indicators?
Changes direction at same time as economy.
What are lagging indicators?
Changes direction after economy.
What is economic growth?
Increases in production of goods.
Explain Endogenous.
Endogenous is factors from within are reasons of expansion and contraction and the markets are believed unstable to the government steps in to smooth out cycles.
Explain exogenous.
Exogenous is factors from outside economy being reasons for expansions and contractions and the markets are believed stable and there is no government intervention needed
Explain leading indicators:
THey change before economy and predict what is going to happen.
Explain Lagging indicators:
Changes come after the economy turing moths after.
Explain coincidental indicators:
They change at thhe same time the economy does and it indicates the state of economy.
What is the monetary policy?
Measures taken to influence money supply and interest rates to achieve economic targets and goals.
What is the fiscal plicy?
Goverments use of taxation and governments expenditure to achieve economic targets.
What is the economy in recession? (using monetary policy)
Stimulates economic activity and increases size of money on intrest rates.
What is the economy in recession? (using fiscal policy)
WHen government stimulates economic activity by increasing spending / reducing tax
What is the economy in expansionary phase? (using monetary policy)
Decrease level of economic activity and decrease money intrest rates.
What is the economy in expansionary phase? (using fiscals policy)
When government dampens activity by reducing spending or increasing tax
