The Business Cycle

Question 1

What is gross domestic product (GDP)?

Answer 1

The total amount of money that is generated by producing and selling finished goods by a country over a long period of time
The way the government can view the health of the country’s economy

Question 2

How often is the health of the country’s economy measured?

Answer 2

Every three months

Question 2

What is the government department that measures GDP called?

Answer 2

Office for National Statistics

Question 3

What is the business cycle?

Answer 3

Recurring fluctuations in the country’s economic activity

Question 4

What are the four main phases of the business cycle?

Answer 4

Expansion
Peak
Recession
Trough

Question 5

What is an expansion?

Answer 5

When the country has two consecutive quarters of positive GDP

Question 6

What are the key characteristics of an expansion?

Answer 6

Rising GDP
Economy produces more goods and services
Lower unemployment
People spend more due to optimism about the economy
Companies expand operations and invest in new projects

Question 7

What is a peak?

Answer 7

The highest point of the business cycle, marking the transition from economic expansion to recession

Question 8

What are the key characteristics of a peak?

Answer 8

GDP is at its highest level
Low unemployment and abundant job opportunities
Demand outpaces supply, leading to price increases
Spending and investment are strong
Excessive growth can lead to economic instability

Question 9

What is a recession?

Answer 9

When the country has two consecutive quarters of negative GDP

Question 10

What are the key characteristic of a recession?

Answer 10

Declining GDP
Economy produces fewer goods and services
Higher unemployment
People spend less due to financial uncertainty
Companies delay expansion and reduce costs

Question 11

What are the causes of a recession?

Answer 11

Financial crises such as banking failures
High inflation
Supply chain disruptions
Government policies such as interest rate hikes
External shocks such as wars, pandemics or natural disasters

Question 12

What is a trough?

Answer 12

The lowest point in the business cycle, marking the transition from economic decline to recovery

Question 13

What are the key characteristics of a trough?

Answer 13

Lowest GDP levels
High unemployment
Confidence is low and demand is weak
Companies struggle and investment slows