Business Cycle

Question 1

Stages of business cycle

Answer 1

Boom, downswing, trough, upswing

Question 2

Boom

Answer 2

Above average rate of economic growth/activity

Question 3

Recession

Answer 3

2 negative quarters of economic growth

Question 4

Contraction/downswing

Answer 4

Slowing growth rate

Question 5

Bottleneck

Answer 5

Shortage of labour/productive capacity

Question 6

What is a main factor affecting the business cycle?

Answer 6

Firm investment in new capital, level of sales

Question 7

Trough

Answer 7

Aggregate expenditure below economy’s potential

Question 8

Cyclical unemployment

Answer 8

Unemployment due to a lapse in economic activity

Question 9

Lagging

Answer 9

Not expected to show until after a change in economic activity

Question 10

Leading

Answer 10

Before a change in economic activity

Question 11

Coincident

Answer 11

Occurs during a change in economic activity

Question 12

Types of economic indicators

Answer 12

Leading, lagging, coincident

Question 13

Long term trend

Answer 13

Line of best fit

Question 14

Features of boom

Answer 14

Confidence, high consumption expenditure (luxuries, durables), profitability, utilisation of productive capacity, low cyclical unemployment, high labour market participation, high inflation, high borrowing

Question 15

Features of contraction

Answer 15

Increased YEO of boom levels off, slower growth, uncertainty decreases confidence, short and sharp, risk to invest

Question 16

Bottleneck

Answer 16

Shortage of labour or productive capacity

Question 17

Features of trough

Answer 17

Higher cyclical unemployment, reduced profit, lower durable sales, lower consumer/business confidence, reduced inflation, higher savings, lower interest rates, lack of confidence,

Question 18

Expansion features

Answer 18

Replace worn capital equipment, gradual rise of economic activity/confidence, resume long term growth, longer than downswing, increased investment, increased capacity of firms to produce final goods

Question 19

Periods of sharp declines

Answer 19

1990, 2008-9