The Business Cycle

Question 1

what is a recession?

Answer 1

a period of declining real incomes and rising unemployment

Question 2

what is a depression?

Answer 2

a severe recession

Question 3

what is the business cycle the study of?

Answer 3

the study of the fluctuations in economic growth around the trend growth.

Question 4

what is potential output?

Answer 4

the level of output that occurs when all resources are fully employed

Question 5

what is the business cycle?

Answer 5

short-term fluctuations in economic activity.

Question 6

what is the output gap?

Answer 6

the difference between actual and potential output, measured as a percentage of potential output

Question 7

what are the stages of the business cycle?

Answer 7

-peak
-trough
-recession
-expansion

Question 8

what are credit constraints?

Answer 8

limits on amount borrowed/ ability to borrow

Question 9

what are leading indicators?

Answer 9

Variables that tend to predict the future path of the economy

Question 10

what are lagging indicators?

Answer 10

Variables that tend to follow business cycle movements with a bit of a delay