the business cycle

• What is the business cycle?

  The business cycle refers to the fluctuations in economic activity over time.
• How is economic growth defined?

  Economic growth is defined as an increase in GDP from one year to the next.
• How is economic activity measured?

  Economic activity is measured each quarter.
• What does it mean if there are two consecutive quarters of negative growth?

  If there are two consecutive quarters of negative growth, the economy is said to be in recession.
• What does negative growth indicate about the economy?

  Negative growth means the economy is shrinking.
• Does slowing growth indicate that the economy is in recession?

  No, slowing growth does not mean the economy is in recession.
• What is the long-term trend of GDP?

  The long-term trend of GDP is upwards, indicating that GDP increases over time.
• How does the business cycle behave over time?

  The business cycle includes periods of rapid growth, slowing growth, and contraction.
• What types of policies can be used to influence the economy?

  Fiscal and monetary policies can be used to speed up or slow down the economy.
• Who is in charge of fiscal policy?

  The government is in charge of fiscal policy.
• Who is in charge of monetary policy?

  The central bank is in charge of monetary policy.
• What are some fiscal policies to speed up the economy?

  • Stimulus packages (spending on businesses and infrastructure)
  • Cutting taxes, especially for those with higher marginal propensity to consume (MPC)
• What are some fiscal policies to slow down the economy?

  • Increasing taxes, particularly for wealthier individuals
  • Reducing government spending or stimulus
  • Introducing new taxes (e.g., inheritance taxes)
• What are some monetary policies to speed up the economy?

  • Cutting the cash rate to encourage spending
  • Increasing the money supply through bond purchases
• What are some monetary policies to slow down the economy?

  • Raising the cash rate, leading to higher interest rates
  • Selling RBA bonds to reduce the money supply
• What are the key terms associated with the business cycle?


  *cover and remember