Unit 12 Flashcards
What is the business cycle?
The economy fluctuates between growth and contraction in a regular cycle
Put the business cycle in the right order from 1-4.
1. Trough 2.Peak 3.Contraction 4.Expansion
■ Expansion
■ Peak
■ Contraction
■ Trough
What is the expansion phase of the business cycle?
Expansion is when the economy reaches the prior peak and continues to grow.
What is a benefit of understanding the business cycle?
It is part of providing good advice and recommendations to customers
Some economist differentiate the expansion phase into two parts. What are these 2 parts called?
recovery and expansion
What phase of the business cycle are the following associated with:
■ rising property values
■ increased consumer demand for goods and services
Expansion
What is another name for the peak phase in a business cycle?
Peak or prosperity
What is recovery phase in the business cycle?
Recovery is the period of growth from the trough to the prior peak
What phase of the business cycle are the following associated with:
■ rising numbers of bankruptcies and bond defaults
■ falling stock prices
Contraction
True or False
A characteristic of the Prosperity phase is very high unemployment.
False
There is very low unemployment
What phase of the business cycle are the following associated with:
■ a slowdown in inflation,
■ a slowing of GDP, and
■ steady consumer demand.
Peak
Which state of the business cycle is characterized by rising consumer demand and higher wages?
A. Contraction B. Expansion C. Recession D. Trough
B
Economic data shows that the gross domestic product (GDP) has been declining steadily over the past two quarters. This would suggest A. expansion. B. inflation. C. a depression. D. a recession.
D
Inflation is most commonly found during which phase of the business cycle?
A. Expansion B. Peak C. Contraction D. Trough
A
What is the relationship between the economy and inflation taking, when there is contraction of the economy ?
In normal economic cycles, we tend to see inflation be very low, or even deflation, when the economy is contracting.
During what phase of the economic cycle does most of the existing productive capacity is already in use (all the workers are working and all the factories are producing). Therefore, as demand increases the prices tend to rise?
an expansion
True or False
A trough has high unemployment
True
True or False
■ decreasing inventories
■ decreasing GDP.
Are characteristics of a contraction
True and False
■ rising inventories
■ decreasing GDP
Describe the expansion phase characteristics as it pertains to production, stock prices and GDP
■ increases in industrial production,
■ rising stock prices and
■ increasing GDP.
What is a recession?
When the economy enters an extended period of contraction that continues for six months or longer
What is an example of a severe recession in American history?
as in the Great Recession of 2008
What phase of the business cycle is associated with higher consumer debt?
Contraction
What is a depression?
If a contraction continues for 18 months
As it relates to GDP, demand and inflation . Describe a trough.
■ flat GDP
■ low inflation
■ low, but not decreasing, consumer demand.
Give an example of a time period of a mild recession in American history
as occurred in the early 1990s
How did the great depression come to be?
The recession of 2009 began in the fourth quarter of 2008 with a GDP reading of -2.75%. The first three quarters of 2009, GOP readings were -3.29%, -3.92%, and -3.05%. It ended within two months .
True or False
Depressions occur frequently
False
Depressions rarely occur
The recession of the early 1990s began in July of 1990 and lasted about eight months. GDP for the first three quarters of 1991 were -0.95%, -0.54, and -0.10, respectively. This was seen as a (severe/mild )recession
mild
