Macroeconomics

Question 1

Describe Leading Indicators

Answer 1

The leading indicators included in the Conference Board’s index are (1) average weekly hours worked by manufacturing workers, (2) unemployment claims, (3) consumer goods orders, (4) stock prices, (5) orders for fixed assets, (6) building permits, (7) timeliness of deliveries, (8) money supply, (9) consumer confidence, and (10) the spread between the yield on 10-year Treasury bonds and the federal funds rate.

Question 2

Describe the phase of business cycle

Answer 2

1. Peak
2. Recession
3. Trough: is marked by low levels of economic activity and underused of resources. Investors are unwilling to risk new investments in productive capacity.
4. Recovery

Question 3

What factors contribute to the variations between business cycle?

Answer 3

Duration: varying lengths of time
Intensity: the magnitude of the economic growth or contraction

Question 4

What indicates that the economy is in a recessionary phase?

Answer 4

Potential national income exceeds actual national income. (Potential national income is the output that could be achieved if the economy sustained full employment. During a recession, unemployment rises, causing actual national income to be less than potential national income.)

Question 5

What does consumer price index measure?

Answer 5

It measures the rate of inflation

Question 6

What are the functions of money?

Answer 6

1. Common basis for measuring stored accounts
2. A means of storing value over a long period of time
3. A tool for facilitating the exchange of goods and services
   Money has three principal uses: a medium of exchange, a unit of account, and a store of value

Question 7

What does the value of money vary?

Answer 7

It varies inversely with the general level of prices because as prices rise, the purchasing power of a stock of money held diminishes.