ch.12 sec.2 assessment

question

Which phase of a business cycle can lead an economy into recession?
answer

a contrction because a recession is a prolonged contarction and to determine when in recession real GDP starts to fall. Contraction is a period of economic decline marked by falling real GDP
question

How can interest rates push a business cycle into a contraction?
answer

High interest rates can promote saving, which in turn can cause a downturn in demand, causing surplus products on the market.
question

Why is the stock market considered to be a leading indicator of economic change?
answer

a leading indicator is a set of key variables that economists use to predict phase of a business cycle, and a stock market, typically, turns sharply downward before a recession begins.
question

How did the Great Depression affect economists beliefs about the macroeconomy?
answer

The Great Depression affected economists’ beliefs about the macroeconomy because it made them realize that the U.S. economy actually depends on the economies of countries around the world. Prior to this, the thought was that our economy was solely dependent on actions within the U.S.

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