The Business Cycle

Question 1

what is the current growth rate

Answer 1

3.1% pa

Question 2

what 4 things will GDP to grow

Answer 2

population growth
resource development
technological change
increase in productivity

Question 3

what is the boom period and what are the 4 characteristics

Answer 3

a period when economic activity and general level of activity is high

1. consumption exp is high on durables/luxuries
2. confidence
3. low UE
4. inflationary pressure

Question 4

define recessions and what is it caused by

Answer 4

2 succesive quarters of falling real GDP/neg economic growth caused by low output after boom due to rising costs

Question 5

describe the contractionary economic policy

Answer 5

reduces level of boom activity through tax, interest rates and reduced spending

Question 6

what is the trough and what are 3 characteristics

Answer 6

agg spending is below the point necessary to sustain economic growth

1. conumption exp low on durables
2. low confidence
3. low profits

Question 7

what causes an upswing (with relation to the expansionary policy)

Answer 7

firms buy new equipment, trough forces competition

expansionary policy - increases econ activity through lower tac, gov spending and low interest rates

Question 8

what is a leading indictory of economic activity with examples

Answer 8

changes before the trend becomes evident in the rest of the economy (predicts econ trend)
1. shares prices, stock levels, building approvals

Question 9

what is a coincident indicator of economic activit with examples

Answer 9

indicators that move in time with economy

1. ouput, sales, interest rates, GDP

Question 10

what is a lagging indicator of economic activit with examples

Answer 10

not expected to show until after economy has confirmed reacts to econ trends from th epast
1. UE, bankruptcy, inflation