2.4 Business Cycles

• Business cycles are characterized by periods of expansion and contraction
• Order the economic phases during a business cycle:

  1️⃣ Expansion

  2️⃣ Peak

  3️⃣ Contraction

  4️⃣ Trough
• A depression typically requires a slower and more challenging recovery
• During the expansion phase, economic activity is increasing
• Match the feature with the correct economic condition:

  Temporary GDP decrease ↔️ Recession

  Prolonged economic decline ↔️ Depression
• New housing starts are an example of a leading economic indicator.


  True
• Business cycles are characterized by fluctuations in economic activity.
• What are expansion and contraction considered key phases of?

  The business cycle
• What happens to output, employment, and prices during the expansion phase?

  They increase
• What does the cyclical nature of market economies highlight?

  Fluctuations in economic trends
• Leading economic indicators reflect past trends in the economy.

  False
• The business cycle is driven by complex interactions between various economic factors.


  True
• A recession is characterized by a decrease in GDP for two consecutive quarters.


  True
• What are business cycles characterized by?

  Expansion and contraction
• Order the phases of the business cycle.

  1️⃣ Expansion

  2️⃣ Peak

  3️⃣ Contraction

  4️⃣ Trough
• What type of economic indicator predicts future economic changes?

  Leading
• Order the factors influencing business cycles based on their primary impact.

  1️⃣ Consumer Spending

  2️⃣ Investment

  3️⃣ Government Policies

  4️⃣ External Events
• The trough phase marks the end of a contraction and the start of a recovery.


  True
• The business cycle is characterized by natural fluctuations in economic activity
• Match the phase of the business cycle with its characteristics:

  Expansion ↔️ Rising GDP and low unemployment

  Contraction ↔️ Falling GDP and high unemployment
• A depression typically lasts longer than a recession.

  True
• A recession is characterized by a decrease in GDP for two consecutive quarters
• What is an example of a leading economic indicator?

  New housing starts
• Fiscal and monetary policies are used to manage the business cycle
• Match the phase of the business cycle with its description:

  Expansion ↔️ Increasing economic activity

  Peak ↔️ Growth starts to slow

  Contraction ↔️ Decreasing economic activity

  Trough ↔️ Economy starts to recover
• During contraction, the economy experiences job losses and reduced spending
• A depression results in a substantial drop in GDP, often 10% or more.


  True
• During a contraction, unemployment rates typically rise.


  True
• Economic indicators are categorized into three types: leading, coincident, and lagging
• What role does consumer spending play in business cycles?

  Drives expansion and contraction
• Match the business cycle phase with its description:

  Expansion ↔️ Rising economic activity

  Peak ↔️ Highest point of growth

  Contraction ↔️ Decreasing economic activity

  Trough ↔️ Lowest point of decline
• What are the four phases of the business cycle?

  Expansion, Peak, Contraction, Trough
• The peak of the business cycle is the highest point of economic contraction.

  False
• Recession and depression differ in severity and duration
• How does the severity of a depression compare to a recession?

  It is more severe
• Match the type of economic indicator with its example:

  Leading ↔️ New housing starts

  Coincident ↔️ GDP

  Lagging ↔️ Unemployment rate
• How does decreased investment affect the economy?

  Slows down economic growth
• Lower interest rates are an example of expansionary monetary policy.


  True
• Increased consumer spending leads to economic contraction.

  False
• What is the impact of expansionary fiscal policy during a contraction?

  Stimulates the economy