2.5 Business Cycles

• What are business cycles characterized by?

  Fluctuations in economic activity
• The trough of a business cycle is the lowest point of economic decline
• How many phases are there in a business cycle?

  Four
• What is the lowest point of economic activity in a business cycle called?

  Trough
• Match the type of economic indicator with its description:

  Leading Indicators ↔️ Change before the economy

  Coincident Indicators ↔️ Change at the same time

  Lagging Indicators ↔️ Change after the economy
• Coincident indicators change at the same time as the overall economy
• Expansionary monetary policy by the central bank can stimulate the economy
• Expansionary monetary policy is used to control inflation.

  False
• Increased consumer spending is a cause of economic expansion
• During the expansion phase, GDP, employment, and consumer spending all increase
• Match the phase with its description:

  Peak ↔️ Highest point of expansion

  Contraction ↔️ Period of economic decline

  Expansion ↔️ Period of economic growth

  Trough ↔️ Lowest point of contraction
• What are coincident indicators used to track?

  Current economic conditions
• Inflation tends to fall during a contraction.


  True
• The peak of a business cycle marks the highest point of economic growth.


  True
• A contraction is characterized by decreasing GDP, employment, and consumer spending.


  True
• After reaching the trough, the economy begins to expand
• Which phase of the business cycle is marked by decreasing GDP and rising unemployment?

  Contraction
• What is an example of a leading indicator?

  Consumer confidence
• What is one reason for decreased consumer spending during a business cycle contraction?

  Job losses
• What happens to business investment during a contraction in the business cycle?

  Decline in spending
• What are the two primary phases of economic activity in business cycles?

  Expansion and contraction
• What are the four main phases of a business cycle?

  Expansion, peak, contraction, trough
• What is the trough phase of a business cycle?

  The lowest point of contraction
• Leading indicators signal future economic conditions
• How does GDP change during an expansion?

  Increases
• The expansion phase of a business cycle is a period of economic growth
• What are the two main phases of a business cycle?

  Expansion and contraction
• Order the phases of a business cycle from beginning to end:

  1️⃣ Expansion

  2️⃣ Peak

  3️⃣ Contraction

  4️⃣ Trough
• Increased GDP and employment are characteristics of the contraction phase.

  False
• The unemployment rate is a lagging indicator.


  True
• Technological innovations can contribute to economic expansions.


  True
• Technological innovations can boost productivity and economic growth
• Contractionary monetary policy is used to stimulate economic growth.

  False
• The peak phase marks the highest point of economic decline.

  False
• Arrange the phases of a business cycle in the correct order:

  1️⃣ Expansion

  2️⃣ Peak

  3️⃣ Contraction

  4️⃣ Trough
• Contractions are characterized by declining economic activity