Macroeconomics And The Business Cycle

Question 1

What are the Goals of the Government?

Answer 1

1. High Employment
2. Steady Growth
3. Stable Prices

Question 2

GDP

Answer 2

the total value of all final goods and services produced in an economy
- a measure of growth

Question 3

The Business Cycle

Answer 3

A period of economic expansion followed by a period of macroeconomic contraction

Question 4

What are the Phases of The Business Cycle?

Answer 4

1. Expansion
2. Peak
3. Contraction
4. Trough

Question 5

Expansion

Answer 5

A period of economic growth as measured by a rise in GDP

Question 6

Peak

Answer 6

When real GDP stops rising, the economy has peaked

Question 7

Contraction

Answer 7

Economic declined marked by falling GDP

- Unemployment will generally rise

Question 8

Trough

Answer 8

The lowest point in economic recession

- GDP stops falling

Question 9

What are the 3 types of Contraction?

Answer 9

1. Recession
2. Depression
3. Stagflation

Question 10

Recession

Answer 10

A prolonged economic contraction

- Unemployment will rise

Question 11

Depression

Answer 11

A long and severe recession

Question 12

Stagflation

Answer 12

A decline in GDP (stagnant) combined with rising price levels (inflation)

Question 13

Business Investment

Answer 13

When the economy is expanding, firms expect sales and profits to keep rising

Question 14

Credit Cards

Answer 14

Used to purchase “big ticket” items

Question 15

Interest Rates

Answer 15

The cost of credit

Question 16

Consumer Expectations

Answer 16

• Determined by consumers spending
• Depends on strength of economy
- causes contraction

Question 17

Macroeconomics

Answer 17

The study of behavior and decision making of the entire economy