Lecture 9

Question 1

What are the 3 factors that characterize recession?

Answer 1

Depth: how much did things change?
Duration: how long did it last?
Diffusion: how many people are affected?

Question 2

Procyclical

Answer 2

Any economic variable that moves in the same direction as GDP

Question 3

Countercyclical

Answer 3

Any economic variable that moves in the opposite direction as GDP

Question 4

Consumption is…

Answer 4

Procyclical

Question 5

Investment is…

Answer 5

Procyclical

Question 6

Government spending is…

Answer 6

Countercyclical

Question 7

Why is it that we enter a recession when consumption goes up?

Answer 7

Even though people are making more money, they are definitely not investing so the percentage consumption in the GDP goes up because people are taking their investments to account for their consumption

Question 8

Consumption Smooth Motive

Answer 8

Keep consumption as constant as possible

Question 9

C/GDP

Answer 9

Consumption goes down by a little/GDP goes down by a lot
Ratio increases

Question 10

I/GDP

Answer 10

Consumption goes down by a lot/GDP goes down by a little
Ratio decreases

Question 11

Leading Indicators

Answer 11

Happen before recession
(PPI is leading indicator of CPI)

Question 12

Lagging indicators

Answer 12

Happen after recession