The Business Cycle – Flashcards

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business cycle
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a model of economic change that shows a pattern of growth and decline
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depression
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a time when the ecnomy is very poor and there is a high rate of unemployment
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production
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the creation of goods and services in an economy
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recession
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a decline in the business cycle, when people produce and spend less
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recovery
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an upturn in the business cycle, when people produce and spend more
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There are five stages in a recession. 1. job loss 2. falling production 3. falling demand (occurs twice) 4. peak production In which order do these stages occur?
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3, 2, 1, 3, 4
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Which scenario best reflects the relationship between production and demand in a recession?
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Car dealerships cannot obtain stock.
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Which indicators do economists use to determine the state of the economy?
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-gross domestic product (GDP) -employment levels
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Which of the following events most likely explains renewed demand in a recovery period?
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Increased employment means increased availability of funds.
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These are the four stages of the business cycle. 1. depression 2. prosperity 3. recession 4. recovery In which order do these stages occur?
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2,3,1,4
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Which best describes how a recession develops as demand and production decrease?
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The recession feeds on itself.
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Which best describes what is represented in the business cycle model?
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macroeconomic trends
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Which event best describes why it is difficult to sell a home during a recession?
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Demand greatly decreases.
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During a recession, what is one way governments try to encourage growth?
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by stopping government spending
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Which best describes the nature of cause and effect in the context of the business cycle?
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Each effect has a cause
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Which of the following conditions is most indicative of recovery?
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The economy is growing again.
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Income reaches the highest level at the __________ point of the business cycle.
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prosperity
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What do these graphs indicate about the relationship between employment levels and prices during economic cycles?
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Rising unemployment rates drive prices higher.
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Which best describes how governments respond to changes in the business cycle?
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Governments reduce spending.
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Why might buying a home during a recession be a good decision for some consumers?
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-Housing prices are down. -Less demand means more options for buyers. -Less demand means less competition with other buyers.
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Which of the following is a characteristic of the prosperity phase of the business cycle?
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high levels of production
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