Short-Run Flucutations

Question 1

During an Economic Downturn

Answer 1

Consumption,investment,and GDP decrease, while unemployment increases

Question 2

A multiplier is

Answer 2

An economic mechanism that causes an initial shock to amplified by follow-on effects

Question 3

Important mechanisms that reverse the effects of a recession in a modern economy

Answer 3

-Labor demand increases due to market forces
-Labor demand increases due to expansionary government policies

Question 4

A multiplier is?

Answer 4

An economic mechanism that causes an initial shock to be amplified by follow-on effects

Question 5

What market forces might cause the labor demand curve to shift right

Answer 5

-Excess inventory has been sold off
-The banking system recuperates and business are again able to use credit to finance their activities
-Technological advances encourage firms to expand their activities