Boom-and-Bust Cycle

What is the boom-and-bust cycle?

• A period of economic growth followed by a period of economic decline

• A period of economic decline followed by a period of economic growth

• A period of steady economic growth

• A period of economic stagnation

How many boom and bust cycles has the United States gone through since the 1940s?

• 6

• 9

• 12

• 15

What happens during the boom phase of the cycle?

• Economy shrinks and jobs are lost

• Investors lose money

• Economy grows and jobs are plentiful

• Consumers cut spending

What happens during the bust phase of the cycle?

• Economy shrinks and jobs are lost

• Investors lose money

• Economy grows and jobs are plentiful

• Consumers cut spending

What is the role of the central bank during a boom?

• Lends money at high interest rates

• Lends money at low interest rates

• Restricts credit availability

• Encourages over-investment

Why do boom and bust cycles occur instead of long steady periods of economic growth?

• Due to fluctuations in consumer spending

• Due to changes in government policies

• Partially due to the central bank's handling of the money supply

• Due to natural disasters

How does a boom cycle turn to a bust cycle?

• People over invest

• Demand for products that were over produced gets lower

• People cautiously invest

• Interest rates get lowered

Boom and bust cycles occur repeatedly in _______ economies varying in time and severity.