CSMP19 - Cyclical economic change

Question 1

What is the multiplier effect?

Answer 1

• An increase in employment in an area leads to an increase in income and therefore spending, leading to the opening of leisure and retail facilities such as shops and restaurants.
• Cumulatively, this results in wealth generation.

Question 2

What is a boom?

Answer 2

• A boom is when real national output is rising at a rate faster than the trend rate of growth

Question 3

What is a recession?

Answer 3

• a fall in the level of real national output (a period when growth is negative) for two yearly quarters, leading to a contraction in employment, incomes and profits.

Question 4

What is a depression?

Answer 4

• A depression is a prolonged slump where real GDP falls by more than 10% from the peak of the cycle to the trough