The Business Cycle

Question 1

what are 5 characteristics of a boom

Answer 1

1. higher than ave econ growth = AE above/equal to potential
2. confidence
3. high consumption/proftiability
4. Low UE
5. inflationary pressure

Question 2

what causes a contraction and what can it be described as

Answer 2

environmental factors or gov policies - short and sharp

Question 3

what are 5 characteritsics of a trough

Answer 3

1. low econ growth = AE below potential
2. high UE
3. low profits/consumption
4. low confidence
5. low inflation

Question 4

what causes an expansion and what can it be described as

Answer 4

machinery wears out and requires replacement (investmnt) or firms want to innovate to remain competitive - slow

Question 5

what are 3 narrow economic indicators

Answer 5

1. CPI
2. Interest Rates
3. Stock Market indices

Question 6

what are leading indicators with 3 examples

Answer 6

predict changes in the future, expecting them to change before trend becomes evident inr est of economy

• share prices
• confidence
• stock levels

Question 7

what are coincident indicators with 2 examples

Answer 7

move in line with econ activity

• retail sales
• GDP

Question 8

what are lagging indicators with 4 examples

Answer 8

not expected to show any change until after trend in rest of economy confirmed, reflects developments that occured in the past

• IRs
• UE
• inflation rate
• consumer debt

Question 9

what are pro and counter cyclical indicators

Answer 9

move in line (pro) or oppsoite direction (counter) to economy

pro: GDP/inflation
counter: UE

Question 10

during COVID what was the:

1. UE rate
2. Inflation rate
3. Growth Rate

Answer 10

1. UE = 7.4%
2. -0.7%^
3. -6.3%