Understanding GDP and the Business Cycle

What does an increase in GDP typically suggest about incomes?

• Incomes will increase

• Incomes will fluctuate randomly

• Incomes will remain the same

• Incomes will decrease

Which phase of the business cycle is characterized by a significant decline in economic activity?

• Recession

• Boom

• Recovery

• Expansion

Which of the following best describes the long-term trend of the business cycle?

• Fluctuations with an overall upward trend

• Constant increase

• Constant decline

• Fluctuations with an overall downward trend

Which of the following is an example of an external shock that affected the business cycle?

• The discovery of penicillin

• The 2008 credit crisis

• The Industrial Revolution

• The invention of the internet

What is the impact of business confidence during a recession?

• It encourages investment

• It discourages investment

• It leads to increased hiring

• It has no impact

During a recession phase, businesses are likely to:

• Destock and reduce investments

• Expand their workforce

• Increase stock levels

• Increase investment in capital

What is the likely business strategy during a boom phase?

• Cut down on production

• Reduce stock levels

• Invest more in capital and restock

• Lay off employees

What does YED stand for in economic terms?

• Youth Employment Data

• Yield Elasticity of Demand

• Income Elasticity of Demand

• Yearly Economic Development

If a business has a YED of 0.3 and GDP increases by 10%, what is the expected increase in sales?

• 10%

• 30%

• 3%

• 1%

How does a high YED value affect a business during a GDP increase?

• It causes sales to remain constant

• It results in a significant increase in sales

• It has no effect on sales

• It leads to a decrease in sales