the business cycle

Question 1

business cycle

Answer 1

series of upward and downward movements in the level of economic activity of a country over a period of months or years.

Question 2

Two periods of business cycle

Answer 2

Contraction (downswing)

Expansion (upswing)

Question 3

Expansion (upswing)

Answer 3

the period when economic activity increases. Made up of recovery and prosperity

Question 4

Contraction (downswing)

Answer 4

a period where the economy is falling. Made of recession and depression

Question 5

two turning points

Answer 5

Through: Marks the end of a recession or depression. Lower tuning point of the cycle
Peak: Economic activity increases to a certain point and then stops . After the peak economic activity decreases.

Question 6

peak

Answer 6

The point at which economic activity stops increasing and begins to decrease. upper turning point

Question 7

how are business cycles measured

Answer 7

from peak to peak and from through to through

Question 8

Four phases of the cycle

Answer 8

recession
prosperity
recovery and depression

Question 9

Recession

Answer 9

The negative economic growth rate for two consecutive quarters
Business reduce output
unemployment increases
reduce in income
ends with a through

Question 10

Depression

Answer 10

Depression occurs when a recession happens for a long time
a severe form of recession
The large scale of unemployment and severe shortage of goods and services

Question 11

Recovery

Answer 11

The economy starts to grow again

Usually starts slow and speeds up over time

Question 12

Prosperity

Answer 12

increase in economic activity in a country
increase in output and employment rate and wages
Standard of living improves
ends when cycle reaches a peak

Question 13

Measuring business cycles (5)

Answer 13

Dating system
GDP
employment growth rate
inflation rate
production of certain goods and services

Question 14

Dating system

Answer 14

stats are recorded on a daily weekly and monthly basis and the compiled quarterly

Question 15

GDP

Answer 15

NB as a measure of the state of the economy

Question 16

Employment growth rate

Answer 16

shows how many people are employed in a country and if there are any changes in the number of employed

Question 17

Inflation rate

Answer 17

Shows’ changes in prices

Question 18

Production of certain goods and services

Answer 18

give an indication of where we are on business cycle

Question 19

Business cycle indicators

Answer 19

Leading lagging and coincident indicators

Question 20

reasons for business cycles (10)

Answer 20

exogenous reasons
natural disasters
political reasons
foreign trade
weather
monetary reasons
endogenous reasons
investment
innovation
savings

Question 21

Effects of business cycles (5)

Answer 21

Changes in aggregate supply and aggregate demand
Changes in economic growth
Changes in the employment rate
Changes in the level of the rate of exchange
effects on people who are economically vulnerable

Question 22

Leading indicators

Answer 22

Change direction before economy. predict whats gonna happen

Question 23

Lagging indicators

Answer 23

Change after economy changes. Confirm what has happened

Question 24

Coincident indicators

Answer 24

change at the same time as the economy changes. Give us the state of the economy

Question 25

Exogenous Reasons

Answer 25

originates from outside the country

Question 26

Foreign trade

Answer 26

Countries likely to feel effect of its foreign trading partners

Question 27

what does an increase in the supply of money lead to?

Answer 27

An increase in supply of money leads to an increase in consumption

Question 28

endogenous reasons

Answer 28

Originate from inside the nations economy

Question 29

what does an increase in investment cause

Answer 29

Increase in investment= increase in economic activity

Question 30

changes in supply and demand

Answer 30

economy expands=increase in aggregate demand which in turn causes aggregate supply to increase
(vice versa)

Question 31

Changes in economic growth

Answer 31

Rate positive during the expansion phase

Rate negative in contraction phase

Question 32

Changes in the employment rate (2)

Answer 32

The employment increase in the expansion phase

Employment decrease in contraction

Question 33

changes in price levels (2)

Answer 33

inflation occurs during expansion and the first part of prosperity
When a recession starts prices are still high but then prices fall. Stagflation

Question 34

Changes in level of the rate of exchange (3)

Answer 34

Expansion and boom phases in other countries leads to an increase in the demand for South African products
Demand for rand increases, rand appreciates (vice versa)
Global recession demand for SA good decreases

Question 35

Effects on people who are economically vulnerable (4)

Answer 35

Unskilled people first to be retrenched
Lack of relief programs to assist them
poor level of literacy to access and interpret info
Elderly peoples income is reduced as inflation increases as it reduces the buying power of their pension funds

Question 36

seasonal changes

Answer 36

show changes that may occur at certain times of the year

Question 37

random variation

Answer 37

An indication of sudden drought or unexpected events that influence the trend of a business cycle