Unit 12: The Business Cycle

According to the U.S. Commerce Department, the economy is in a depression when a decline in real output of goods and services lasts

18 months or more (6 quarters).

According to the U.S. Commerce Department, the economy is in a recession when a decline in real output of goods and services lasts

6 months or more.

Producers would generally report rising inventories during which period of the business cycle?

Contraction

Which of these places the phases of the business cycle in the correct order?

Contraction, trough, expansion, and peak

Which of the following points to a general decline in prices occurring during severe recessions and the unemployment rate is rising.

Deflation

Inflation is most closely associated with which phase of the business cycle?

Expansion

Which segment of the business cycle would one expect to find rising interest rates and higher wages?

Expansion

Which of the following are characteristics of an economic downturn?

Higher consumer debt

Just as markets can be influenced by many factors, so can the market price of a single company's stock. While all of the following could impact a company's stock price to some extent, which would be the least likely to have a direct and immediate impact?

Political elections

Which of the following refers to prolonged periods of slow or little economic growth, usually accompanied by high unemployment?

Stagnation

Recent reports indicate that the gross domestic product (GDP) has been declining steadily over the past two quarters. This would suggest

a recession.

U.S. consumers are increasing their imports of foreign-made goods. On this data alone, one might expect gross domestic product (GDP) to

decrease.

Economists refer to longer, more severe contractions in the economy as

depressions.

Downturns in the business cycle or economic contractions are characterized by all of the following except

falling inventories.

During periods of economic decline and contraction, one would expect

gross domestic product (GDP) to decrease.

An expansion in the business cycle would be characterized by

increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.

Rising employment due to an increase in demand for goods and services would be associated with periods of

inflation.

GDP turned negative in the first quarter of the year, and was negative again in the second quarter. It is now August and numbers have not improved. The economy is experiencing

recession.

Economists call mild, short-term contractions

recessions.

The nation has passed through very trying economic times. Many have lost jobs and are tapping into savings to maintain their lifestyles. The economy is not weakening and shows a few signs of growth, but the damage from the downturn is very visible. The nation is likely entering a period of

recovery.

The business cycle includes all of the following classifications except

waves.

Which of the following are characteristics of the expansion phase of the business cycle?

Increase industrial production

Which of the following can encourage economic growth because gradually increasing prices tend to stimulate business investment?

Mild inflation

Different degrees of inflation can impact the economy differently. Which of the following best reflects this?

Mild inflation can encourage growth and stimulate the economy.