The Business Cycle

Question 1

What is the definition of the business cycle?

Answer 1

The observed pattern of increases and decreases in economic growth by % change in GDP over the long term

Question 2

What is the definition of an economic boom?

Answer 2

rapid and significant sales growth, while a boom for a country is marked by significant GDP growth.

Question 3

What is the definition of an economic slump?

Answer 3

sharp decline in business activity, trade or market values.

Question 4

What is the definition of an economic recession?

Answer 4

two or more consecutive quarters of negative economic growth, meaning GDP growth contracts during a recession

Question 5

What is the definition of an economic recovery?

Answer 5

A recovery period is typically characterized by abnormally high levels of growth in real gross domestic product, employment, corporate profits, and other indicators.

Question 6

Why do businesses cut back during a slump/recession?

Answer 6

Less finance available, higher risk, conserve cash

Question 7

How CAN a business cut back during a recession/slump?

Answer 7

Redundancies, reduce promotional activity, cut back production, less stock holding

Question 8

How can the MPC react to a recession/slump?

Answer 8

Lower interest rates

Question 9

How can the government react to a recession/slump?

Answer 9

Lower taxation

Question 10

What will a business do in regards to location in a recovery stage?

Answer 10

Look to expand to prepare for the boom