question

One of the first organizations to investigate the business cycle was

answer

the National Bureau of Economic Research.

question

The trough of a business cycle occurs when _____ hits its lowest point.

answer

aggregate economic activity

question

The low point in the business cycle is referred to as the

answer

trough.

question

When aggregate economic activity is increasing, the economy is said to be in

answer

an expansion.

question

When aggregate economic activity is declining, the economy is said to be in

answer

a contraction.

question

Peaks and troughs of the business cycle are known collectively as

answer

turning points.

question

7. Who officially determines whether the economy is in a recession or expansion?

answer

The National Bureau of Economic Research

question

Research on the effects of recessions on the real level of GDP shows that

answer

recessions cause both temporary and permanent declines in real GDP, but most of the decline is temporary.

question

The tendency of many different economic variables to have regular and predictable patterns across industries over the business cycle is called

answer

comovement.

question

The tendency for declines in economic activity to be followed by further declines, and for growth in economic activity to be followed by more growth is called

answer

persistence.

question

The longest contraction in American history occurred

answer

during the 1870s.

question

The long boom occurred in the

answer

1980s and 1990s.

question

By 1937, when a new recession began in the midst of the Great Depression,

answer

GDP had almost recovered to its 1929 level, but unemployment was still above the 1929 level.

question

The worst recessions after World War II occurred

answer

during 1973-1975 and 1981-1982.

question

The longest economic expansion in the United States occurred during the

answer

1990s.

question

Christina Romer's criticism of the belief that business cycles had moderated since World War II depended on the fact that

answer

economists had left out important components of GDP, such as wholesale and retail distribution, transportation, and services, in their pre-World War II estimates.

question

The NBER's Business Cycle Dating Committee picks recession dates by looking at many variables, the four most important of which are industrial production, manufacturing and trade sales, nonfarm employment, and real personal income. These variables are known as

answer

coincident indicators.

question

The recession of 2001 began in _____ and ended in _____.

answer

March; November

question

According to research by Stock and Watson, the recent decline in volatility in many macroeconomic variables was a

answer

sudden drop that occurred around 1984.

question

Stock and Watson found that monetary policy was responsible for about _____ % of the reduction in output volatility that occurred in the mid-1980s.

answer

20to30

question

An economic variable that moves in the same direction as aggregate economic activity (up in expansions, down in contractions) is called

answer

procyclical.

question

An economic variable that moves in the opposite direction as aggregate economic activity (down in expansions, up in contractions) is called

answer

countercyclical.

question

An economic variable that doesn't move in a consistent pattern with aggregate economic activity is called

answer

acyclical.

question

A variable that tends to move in advance of aggregate economic activity is called

answer

a leading variable.

question

A variable that tends to move at the same time as aggregate economic activity is called

answer

a coincident variable.

question

A variable that tends to move later than aggregate economic activity is called

answer

a lagging variable.

question

Diebold and Rudebusch showed that the composite index of leading indicators did not improve forecasts of industrial production because

answer

data on the components of the index are revised.

question

Which of the following macroeconomic variables is procyclical and coincident with the business cycle?

answer

Industrial production

question

Which of the following macroeconomic variables is procyclical and leads the business cycle?

answer

Residential investment

question

Which of the following macroeconomic variables is acyclical?

answer

Real interest rates

question

Which of the following macroeconomic variables is procyclical and lags the business cycle?

answer

Nominal interest rates

question

Which of the following macroeconomic variables would you include in an index of leading economic indicators?

answer

Residential investment

question

Which of the following macroeconomic variables would you exclude from an index of leading economic indicators?

answer

Industrial production

question

Industries that are extremely sensitive to the business cycle are the

answer

capital goods and durable goods sectors.

question

You want to invest in a firm whose profits show large fluctuations throughout the business cycle. Which of the following would you invest in?

answer

A corporation that depends heavily on business fixed investment

question

Which of the following statements is true?

answer

Employment is procyclical and unemployment is countercyclical.

question

Which of the following statements is true?

answer

Nominal interest rates are procyclical and real interest rates are acyclical.

question

Using the seasonal business cycle as your guide, during which quarter would you be most likely to expect an increase in your corporation's sales?

answer

The fourth quarter of the year (October-December)

question

Which of the following macroeconomic variables is the most seasonally procyclical?

answer

Expenditure on durable goods

question

Which of the following macroeconomic variables doesn't vary much over the seasons?

answer

The real wage

question

What are the two main components of business cycle theories?

answer

A description of shocks and a model of how the economy responds to them

question

Economists use the term shocks to mean

answer

typically unpredictable forces that have major impacts on the economy.

question

Wars, new inventions, harvest failures, and changes in government policy are examples of

answer

shocks.

question

The three main components of the aggregate demand-aggregate supply model include

answer

AD, SRAS, LRAS

question

The AD, SRAS, and LRAS curves each show a relationship between which two economic variables?

answer

The aggregate price level and output

question

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, which of the following curves slopes downward?

answer

AD

question

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, which of the following curves is vertical?

answer

LRAS

question

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, the long-run aggregate supply curve

answer

is vertical.

question

A decrease in government spending on the park system would cause

answer

the aggregate demand curve to shift to the left.

question

A decline in the stock market, which makes consumers poorer, would cause

answer

the aggregate demand curve to shift to the left.

question

In the short run, an increase in export sales would cause output to _____ and the price level to _____.

answer

rise; stay constant

question

In the long run, an increase in consumer spending would cause output to _____ and the price level to _____.

answer

stay constant; rise

question

In the long run, an increase in government purchases of military equipment would cause output to _____ and the aggregate price level to _____.

answer

stay constant; rise

question

According to classical macroeconomists, prices adjust _____ to shocks, so the government should _____.

answer

rapidly; do little

question

According to Keynesian macroeconomists, prices adjust _____ to shocks, so the government should _____.

answer

slowly; fight recessions

question

In the long run, an increase in productivity would cause output to _____ and the aggregate price level to _____.

answer

rise; fall

question

In the long run, a reduction in labor supply would cause output to _____ and the aggregate price level to _____.

answer

fall; rise

question

The key difference between classical and Keynesian macroeconomists is their differing beliefs about

answer

the speed at which prices adjust.

Chapter 8: Business Cycles – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards