Economic Output and Business Cycle Quiz

What happens to economic output as measured by GDP during a recession?

• It contracts for at least six months.

• It contracts for one month.

• It contracts for at least two years.

• It falls more than the stock market does.

Which of the following are the two phases and the two turning points of the business cycle?

• Expansion and recession, peak and trough

• Growth and contraction, market top and market bottom

• Recession and advance, peak and trough

• Expansion and reversal, peak and prosperity

What happens to real GDP, prices and unemployment at the peak of a business cycle?

• Real GDP grows, prices fall, and unemployment is high.

• Real GDP shrinks, prices rise, and unemployment is low.

• Real GDP shrinks, prices fall, and unemployment is low.

• Real GDP grows, prices rise, and unemployment is low.

According to this chart, what was the unemployment rate during the peak of the business cycle?

• 6%

• 5%

• 3%

• 7%

Economists recognize that the economy doesn't grow smoothly, but in regular patterns. Which of these terms best describes this?

• The Business Cycle

• The Classical Model

• A recession

• The Keynesian Cycle