Economics 231(04) Exam #3 Fall 2017 Which of the following best defines the busi

Question

Economics 231(04) Exam #3 Fall 2017 Which of the following best defines the business cycle? a. Fluctuations around a long-term growth trend b Changes n economic activity due to natural causes c Increase in the level of business activity over an extended period of time d. Changes in business activity due to wars Which of the following is not a phase of the business Emlyn Norman 1. 2. 3. The portion of the business cycle just following a trough is 4. A recovery must occur after Expansion c. Trough d. recession e. inflation a Recession b expansion c. peak d. depression A peak in the business cycle b a. An expansion c. A recession A period of rising prices d. An economic contraction is usually characterized by a Increased output b. Declining employment S. c. A gradual rise in consumers' incomes d. Increased investment spending by businesses It is generally agreed that the US economy is currently in the expansion phase of a business cycle. Which of the folowing is true? a Equilibrium real GDP is growing b. Cyclical unemployment is increasing c. The natural rate of unemployment is increasing d. The GDP deflator must be declining The term "inflation" is used to describe a situation in which a. The overall level of prices in the economy is increasing b. Incomes in the economy are increasing c Stock-market prices are rising d. the economy is growing rapidly 8. The market value of all final goods and services produced by a country within some time period is termed a. Gross investment b. nets investment c. gross domestic product 9· The GDP figure does not accurately reflect economic welfare because d. net domestic product a. It does not include nonmonetary transactions b. The value of goods produced in the home is usually overstated c. It includes only consumption goods and services d. It usually includes an overstated estimate of social costs 10. GDP that has been adjusted for changes in the price level since a base year is called a. Real GDP b. depreciation c. nominal GDP d. net investment 11. The consumer price index measures the increase in the price of a market basket a. Between the current year and the previous year b. Between the current year and the base year c. Between the previous two years d. Between the current year and the base year while keeping prices constant

Explanation / Answer

(1) A. is the correct answer.

The business cycle is the fluctuation in economic activity that an economy experiences over a period of time. A business cycle is defined in terms of periods of expansion or contraction.

(2) E. is the correct answer.

Each business cycle has four phases. They are expansion, peak, contraction and trough. These don’t occur at regular intervals.

(3) (B) expansion.

expansion is a period when the level of business activity surges and gross domestic product expands until it reaches a peak.

(4) (C) recession.

recovery is a period of increasing business activity signaling the end of a recession.

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