Business Cycles And The Keynesian Theory

Question 1

Define the business cycle

Answer 1

Periodic growths and contractions in the economy
Unpredictable and happen in both developed and undeveloped countries

Question 2

What are the business cycles in theory

Answer 2

Expansion,peak,recession
Depression, trough, recovery
Expansion. Peak, recession

Question 3

When is inflation high during the business cycles?

Answer 3

High during booms

Question 4

When is inflation low during the business cycles?

Answer 4

Lower during recessions/stagnations

Question 5

What is Conceptual output

Answer 5

The amount of production within an economy when all the actors have been employed

Question 6

What are the two states the economy can be in that affects its potential output

Answer 6

Recession - lower
Booms. - higher

Question 7

What are the main functions of the Keynesian cycles

Answer 7

• smooth business cycle by being counter cyclical
• slow economic booms
  -support during recessions

Question 8

What is the formal for the Keynesian cross

Answer 8

Expenditure= C + I + G

Question 9

What is the formula for consumption?

Answer 9

C = a + b( Y + T)
= a - bT + bY

Question 10

What is autonomous consumption ?

Answer 10

A-bT
- consumption independent of income

I & are both autonomous