The Business Cycle Flashcards

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1
Q

What is the Business Cycle?

A

The Business Cycle is a measurement of the economy over a period of time (months, years).
Because the economy changes a lot, the Business Cycle goes up and down, like a roller coaster

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2
Q

What does the Business Cycle measure?

A

The Business Cycle measures how much GDP (Gross Domestic Product) an economy has.
GDP is the total dollar amount of all goods and services produced in a year. Basically what the population spends their money on and how much money they receive.

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3
Q

What is the peak?

A

The highest point on the business cycle.
Spending is at its highest level and at the end of its expansion
Low unemployment and rising prices

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4
Q

What is a recession?

A

A decline in spending activities, two consecutive quarter or six months in a row
Business activity slows
GDP shrinks until it reaches a trough
Prices are falling
Unemployment is rising

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5
Q

What is a trough?

A

This is where the Business Cycle “bottoms out” because it marks the end of the declining business activity and the beginning of the recovery of the economy.
Unemployment at its highest level
Prices are falling

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6
Q

What is recovery?

A

Business production and spending increases
The amount of people that are employed or are getting jobs increases
Business activity surges
GDP expands until it reaches a peak

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7
Q

What are trends?

A

While growth will rise and fall with cycles, there is a long-term trend line for growth; when economic growth is above the trendline, unemployment usually falls.

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8
Q

What are economic indicators?

A

Macro data or statistics an indicative of the past, present and future state of the economy.
These data are used by economists, investors, governments and financial analysts to predict the future state of the economy or the health of the economy.

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9
Q

What are the three economic indicators?

A

Leading Indicators – data help to predict the future state of the economy.
Example: Housing start
Lagging Indicators – data reflect past performance
Example: unemployment rate
Coincident Indicators – data reflect the current trend
Example: payroll data.

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