Understanding the Business Cycle

The business cycle is a key concept in economics, representing fluctuations in economic output and growth, measured by changes in real GDP. It consists of phases: peak, recession, trough, and expansion. During expansion, economic growth is driven by consumer confidence, leading to increased spending and investment. A peak occurs when the economy reaches maximum output, often followed by a recession due to events like financial crises. A trough marks the lowest point, requiring government intervention for recovery. Key indicators include output, consumer spending, inflation, employment, interest rates, and wages.

What is the business cycle primarily measured by?

• Fluctuations in stock market prices

• Shifts in employment rates

• Variations in Real GDP

• Changes in consumer spending

Which phase of the business cycle is characterized by a declining GDP?

• Trough

• Recession

• Peak

• Expansion

During an economic expansion, what typically increases?

• Government intervention

• Consumer confidence

• Unemployment

• Interest rates

What happens when an economy reaches its peak?

• Demand falls below supply

• The economy begins to overheat

• Consumer confidence rises

• Investment increases

What usually triggers a slowdown after a peak?

• Government intervention

• A financial crisis

• Increased consumer spending

• Rising employment

What is a trough in the business cycle?

• A period of rapid inflation

• The lowest point in a declining growth rate

• The highest point of economic growth

• A phase of maximum output

Which of the following is NOT an indicator of the business cycle?

• Weather patterns

• Consumer spending

• Interest rates

• Output

What role does government intervention play in the business cycle?

• It helps restore confidence and re-enter expansion

• It decreases consumer spending

• It is unnecessary during a recession

• It causes the economy to overheat

Which phase is associated with stress and frustration for business owners?

• Peak

• Expansion

• Recession

• Trough

What is the general trend of economic growth in the long term?

• Upward

• Fluctuating

• Stable

• Downward