Economic Concpets: Changes in Economic & Business Cycles

Question 1

Business Cycles

Answer 1

Rise and fall of economic activity relative to its long-term growth trend

Question 2

Macroeconomics

Answer 2

The study of economy as a whole. It examine the determinants of national income, unemployment, inflation, and how monetary fiscal policies affect economic activity

Question 3

Gross Domestic Product GDP

Answer 3

Total market value of all final goods and services produced within the borders of a nation in a particular period

Question 4

Nominal

Answer 4

Not Adjusted for inflation. This effects current prices of goods and services

Question 5

Real GDP

Answer 5

Inflation

Question 6

Price Index

Answer 6

Real GDP= (Nominal GDP/ GDP deflator) X 100

Question 7

Real GDP per capita is real GDP divided by population

Answer 7

Economic growth is the increase in real GDP per capita over time

Question 8

Expansionary Phase

Answer 8

GDP rises, profits rises

Unemployment decreases prices increases

Question 9

Peak

Answer 9

high point of economic activity. It means the end of the expansionary phase. Firms likely to face capacity constraints

Question 10

Contractionary Phase

Answer 10

GDP decreases Profits Decreases Unemployment increases

Question 11

Trough

Answer 11

low point of economic activity

Question 12

Recovery Phase

Answer 12

recovery phase follows a trough. Economy starts to return to its long-term trend

Question 13

Recession

Answer 13

Contractionary Phase GDP decreases Profits decreases unemployment increases
2 consecutive quarters of falling national output

Question 14

Depression

Answer 14

very severe recession. Large drops of GDP, high unemployment

Question 15

Lagging Indicators

Answer 15

tend to follow economic activity, they change after a given economic trend has already started.

Question 16

Coincident Indicators

Answer 16

Provides info about the current state of the economy,

Question 17

Reasons for fluctuation

Answer 17

business cycles result from shifts in aggregate demand and/or aggregate supply

Question 18

Changes in Wealth: Increase

Answer 18

Causes the aggregate demand curve to shift to right. Causes the economy to expand and leads to an increase in national output

Question 19

Decreases in Wealth

Answer 19

Overall negative in the economy. causes the curve to shift to the left

Question 20

Changes in Real Interest Rates : Increase in real interest rates

Answer 20

More saving and less borrowing . AD decreases GDP decreases Unemployment increases

Question 21

Decrease in Real Interest Rates

Answer 21

AD increases, GDP increases Unemployment decreases and prices increases.

Question 22

Increase in Government Spending

Answer 22

AD increases GDP increases Unemployment decreases prices increase

Question 23

Decrease in Government Spending

Answer 23

AD decreases, GDP decreases, Unemployment increases Prices decrease

Question 24

Increase in Consumer Taxes

Answer 24

AD decreases GDP decreases Unemployment increases Prices decreases

Question 25

Decrease in Consumer Taxes

Answer 25

AD increases GDP increases unemployment decreases price increases

Question 26

Multiplier Effect

Answer 26

1/ (1-MPC)

Question 27

Factors that shift aggregate demand

Answer 27

• Taxes
• Wealth
• Interest Rates
• Consumer Spending
• Exchange Rates
• Government Spending

Question 28

In a recession

Answer 28

Actual output will exceed potential output.

Question 29

A recession can be caused by

Answer 29

• A decrease in aggregate supply and demand

Question 30

Real GDP per capita

Answer 30

The measure most often used to compare standards of living across countries or across time

Question 31

Gross domestic product includes which of the following measures

Answer 31

The total monetary value of all final goods and services produced within a nation in one year

Question 32

The trough of a business cycle is generally characterized by

Answer 32

Unused productive capacity and an unwillingness to risk investments