Chapter 13: The Business Cycle and Unemployment

Question 1

What are the 4 phases of the business cylce?

Answer 1

Expansion
Peak
Recession
Trough

Question 2

What marks an expansionary phase?

Answer 2

GDP increase
Available jobs grow
Unemployment falls
National income falls

Question 3

What marks a peak phase?

Answer 3

Sales will hit record levels
Labor costs will rise
Increase in costs of borrowing money

Question 4

What marks a recession phase

Answer 4

Decline of “Big-Ticket” items
Sales decline overall
Suppliers cut prices
Production slows

Question 5

What marks a trough phase?

Answer 5

Low prices
High unemployment
Depressed Incomes

Question 6

Define the Term: Depression

Answer 6

An extended trough phase

Question 7

What are the 5 theories into the causes of the business cycle?

Answer 7

Sunspot Theory
Psychological Theory
Monetary Theory
Political Theory
Technological Theory

Question 8

Define the Term: Unemployment Rate

Answer 8

The percentage of people who is not employed and are actively looking for work

Question 9

Who is not counted in the unemployment rate regardless of employment status

Answer 9

Under 16 years old and over 65*
Those in the armed forces
Those institutionalized

Question 10

Define the Term: Labor Force

Answer 10

16-64* years old, not in the the armed forces, or institutionalized

Question 11

Define the Term: Discouraged Worker

Answer 11

A person who has been unemployed for several months and is no longer looking for a job

Question 12

What are the major flaws with unemployment numbers?

Answer 12

Does not count many people who DO work but not for financial gain (homemakers)
Does not include numbers from people who don’t work at all
Counts people as employed when they are underemployed
Count some people who DO have jobs as unemployed

Question 13

Define the Term: Underemployed

Answer 13

Workers who have a job but whose income does not bring in enough to cover their expenses

Question 14

What are the 4 types of unemployment

Answer 14

Frictional
Structural
Seasonal
Cyclical

Question 15

Define the Term: Frictional Unemployment

Answer 15

People between jobs for a multitude of reasons

Question 16

Define the Term: Structural Unemployment

Answer 16

When workers skills do not match jobs available

Question 17

Define the Term: Seasonal Unemployment

Answer 17

When workers are laid off because the job falls away based on seasonal events

Question 18

Define the Term: Cyclical Unemployment

Answer 18

Unemployment as a result of economic improvement or failings

Question 19

What control does the Federal Government have over unemployment?

Answer 19

Practically none but can provide business incentives to encourage employee retention

Question 20

Referring to a previous chapter, what kind of goods may increase during a recession/trough?

Answer 20

Inferior goods