Understanding the Business Cycle

What is the first stage of the business cycle?

• Economic expansion

• Economic contraction

• Recession

• Peak

What happens during an economic expansion?

• Economic output decreases

• Unemployment increases

• More goods and services are produced

• Consumer spending declines

What is the point just before the downward movement begins in the business cycle?

• Trough

• Peak

• Expansion

• Contraction

What is economic contraction?

• A period of economic growth

• A period when economic output increases

• A period when economic output declines

• A period of declining real income

What can happen during a recession?

• Increased employment and income

• Higher levels of consumer spending

• Long-lasting effects on individuals

• Expansion of the economy

How does the National Bureau of Economic Research (NBER) define a recession?

• Two consecutive quarters of economic contraction

• A significant decline in economic activity that lasts more than a few months

• A measured decrease in real GDP

• A period of declining real income and rising unemployment

What are some possible causes of recessions?

• Positive economic shocks

• Stable monetary policies

• Increased consumer spending

• Financial market disruptions

What is the typical pattern of a recession?

• Rising unemployment and falling profits

• Increased business investment spending

• Higher interest rates and resource prices

• Expansion of production and employment

How does the NBER determine the start and end of a recession?

• By analyzing real GDP growth

• By considering multiple economic indicators

• By using a fixed timing rule

• By relying on forward-looking data

What happens after a recession ends?

• Another recession begins immediately

• The economy enters a period of economic expansion

• The NBER announces the end of the recession

• Consumer spending declines further