Lesson 45 - unit 9

Question 1

What are four key elements of a business cycle?

Answer 1

1. Expansion
2. Peak
3. Recession
4. Troughs

Question 2

How is a business cycle defined?

Answer 2

The calendar time between two peaks or two troughs.

Question 3

What is another term for business cycle?

Answer 3

Economic fluctuations.

Question 4

Why do some economists not like the term business cycle?

Answer 4

Because they occur erratically and last for varying lengths of time.

Question 5

Give two examples of how a business cycle recession can begin.

Answer 5

1. Demand shock - cutback in consumption
2. Supply shock - reduction in availability

Question 6

Give two examples of how a business cycle expansion can begin.

Answer 6

1. Demand shock - increase in government spending
2. Supply shock - greater availability of credit

Question 7

What did Milton Freidman believe caused economic fluctuations?

Answer 7

Money supply not keeping pace with output.

Question 8

What does the Austrian School of economics say causes recessions?

Answer 8

A central government’s intervention in the money and credit markets.

Question 9

Why do economic fluctuations appear inevitable?

Answer 9

Because Individuals, businesses, and governments have freedom to make decisions.

Question 10

What are some positive outcomes that can result from economic fluctuations?

Answer 10

It can be encourage companies to reorganize and trim costs, increase efficiency, and produce jobs.