21.3 Q&A

The high point of economic activity is called ..? The low point of economic activity is called..? The period between the high point of econ. activity and the following low point is called..? The period between the low point of econ. activity and the following high point is called..?

A peak A trough A recession An expansion

Typically, when will the National Bureau of Econ Research (NBER) announce that the economy is in a recession?

A year or more after the recession has begun

As the economy nears the end of an expansion, which of the following typically occurs? Purchases of which types of goods are business circles most likely to affect? Recessions causes the inflation rate to.. and the unemployment rate to...

All of the above Durable goods (are most affected by the business circle) decrease / increase Recessions: - decrease inflation - increases unemployment

The Bureau of Econimc analysis (BEA), part of the federal Gov., might not want to take on this responsibility. Which one of the following reasons is the most appropriate reason for the BEA's refusal?

Because its part of the Government, the BEA could be pulled into politics with the dating of recessions.

Once economic activity picks up and your sales increase, why might you not immediately start rehiring workers?

Before rehiring you would like to make sure that his economic expansion lasts.

Which of the following is not a reason that the economy is considered to be more stable in the 1950-2007 period than in other periods? During the last half of the 20th century, the US economy experienced..?

Continually falling oil prices long expansions, interrupted by relatively short recessions

What is the general relationship between the business circle and unemployment and inflation?

During an expansion, unemployment falls and inflation increases

Use the graph to help determine which of the following statements regarding fluctuation in real GDP is true?

In the first half of the 20th century, real GDP had much more severe swings than in the second half

[Related to Don't let this happen to you] "Real GDP in 2012 was... Therefore economic growth must have been high during 2012" Do you agree?

No, I do not agree

Consider the following choices. Which of them is correct? Many economists agree that this difference is due to all of the following except..?

Recessions were more severe and lasted longer in the first half of the 20th century and became shorter and milder in the second half people have become more rational and control their spending counter-cyclically.

What is the great moderation? By 2011, why might some people have considered the Great moderation to have been an illusion?

The absence of severe recessions in the US since the mid-1980's. The recession that began in Dec. 2007 was the longest and most severe since the great depression of the 1930's.

Which of the following describes the effect of the business circle on the inflation rate and the unemployment rate? Why might the unemployment rate continue to rise during the early stages of a recovery?

The unemployment rate increases and the inflation rate falls during recessions. Because of both (a) and (C) a) Employment growth may be slow relative to the early stage of a recovery c) Some firms continue to operate well below their capacity even after a recession has ended

[Related to the chapter opener] Changes in the demand for housing affects Whirlpool's sale because..?

Washing machines and dryers are installed or included in virtually every home purchased

[Related to making the connection] When firms expand during recessions, they..? A more cautious approach might be advisable in particular industries where...?

cannot be certain when recovery will occur and know they could experience prolonged losses. sales are particular cyclical.

[Related to the chapter opener] Production of the following goods is likely to fluctuate more / less than fluctuation of real GDP during the business circle. a. Ford F-150 Truck b. McDonald's BigMacs c. Kenmore refrigerator d. Huggie diapers e. Caterpillar industrial tractors

a. more than b. less than c. more than d. less than e. more than fluctuation of real GDP during the business circle.

From a through to a peak, the economy goes through

the expansionary phase of the business circle