Economics 231(03) Exam #3 Fall 2017 Emlyn Norman 1 Economists use the phrase \"b
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Economics 231(03) Exam #3 Fall 2017 Emlyn Norman 1 Economists use the phrase "business cycle" when referring to fluctuations in a. The general price level as measured by the consumer price index b Interest rates as measured by the bank-loan rate c. Federal budget surpluses or deficits d. Aggregate measures of economic output and real income 2. The period betwen the trough of the business cycle and the next peak is called the a. Recessionary phase Recessionary phase c. d Cyclical phase 3. Which of the following will most likely occur during the recession (contraction) phase of the business cycle? a. GDP rises sharply and unemployment falls b Real GDP increases and inflation rises sharply c. Real GDP declines and unemployment rises d. Inflation rises and employment falls Which of the following will most likely occur during the expansionary phase of a business cycle? a. GDP rises sharply and unemployment falls b. Real GDP declines and inflation rises sharply c Interest rates rise and the number of housing starts declines d. Inflation rises and employment falls The best definition of inflation is a(n) a. Temporary increase in prices due to higher tax rates b. Large increase in food and gasoline prices c Sustained increase in the general price level as measured by a price index d. Increase in the purchasing power of the dollar 4. 5. 6 Which of the following is true of GDP? a. It is an indicator of domestic production b. It measures social progress c It measures material well-being d. It measures social welfare In contrast to nominal GDP, real GDP refers to nominal GDP a. 7. Minus exports Minus personal income taxes b. c. Corrected for price changes d. Corrected for depreciation s. It is generally agreed that the U.S. economy is currently in the expansion phase of a business cycle. Which of the following is true? a. Equilibrium real GOP is growing b Cyclical unemployment is increasing c. The natural rate of unemployment is increasing d. The GDP deflator must be decliningExplanation / Answer
1. Business cycle refers the change in economic activity Particularly measured by real GDP or unemployment i.e. Business cycle is the fluctuations in aggregate measures of economic output and real income.
Answer- option D
2. From trough, the activity increases in an Expansionary phase, or boom until it reaches the peak.
Answer- option B
3. During Recession phase economic growth is negative, real GDP declines , employment declines and unemployment increase.
Answer- option C
4. During Expansionary phase economy moves from trough to peak. Real GDP increases, employment increase, unemployment falls.
Answer- option A
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