Chapter 14- Section 1 Flashcards
Why did the government declare a “bank holiday” in 1933?
To prevent panic withdrawals
What is the difference between a recession and a depression?
A recession can last for six months, but a depression lasts longer with a large number of people out of work, shortages, and excess capacity in factories
How did easy and plentiful credit contribute to the Great Depression?
Many people borrowed heavily, made them vulnerable to credit contractions, high interest rates, and minor business fluctuations
When do businesses invest heavily in capital goods?
When the economy is expanding
What is an inventory adjustment?
Changes in the level of business inventories
What does an innovation usually trigger in industry?
Other businesses try to keep up with the innovation it leads to a big investment
What happens when the Fed allows an easy money policy?
Interest rates are low and loans are easy to get it encourages private sectors to borrow
Give an example of a positive and negative external shock
A positive external shock was when the British discovered oil. A negative external shock is when the US had high oil prices.
What is an Econometric model?
A macro economic model that uses algebraic equations to describe how the economy behaves
What is the index of leading indicators?
It’s an indicator that turns to them before the real GDP turns down and goes up before the real GDP goes up
A period during which real GDP declines for two quarters in a row, or six consecutive months
Recession
The point where real GDP stops going up
Peak
The turnaround point where the real GDP stops going down
Trough
A period of recovery from a recession
Expansion
If a period of recession and expansion did not occur, the economy would follow a steady growth path called what?
A trend line
