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The Business Cycle

business cycle
a model of economic change that shows a pattern of growth and decline
a time when the ecnomy is very poor and there is a high rate of unemployment
the creation of goods and services in an economy
a decline in the business cycle, when people produce and spend less
an upturn in the business cycle, when people produce and spend more
There are five stages in a recession.
1. job loss
2. falling production
3. falling demand (occurs twice)
4. peak production
In which order do these stages occur?
3, 2, 1, 3, 4
Which scenario best reflects the relationship between production and demand in a recession?
Car dealerships cannot obtain stock.
Which indicators do economists use to determine the state of the economy?
-gross domestic product (GDP)
-employment levels
Which of the following events most likely explains renewed demand in a recovery period?
Increased employment means increased availability of funds.
These are the four stages of the business cycle.
1. depression
2. prosperity
3. recession
4. recovery
In which order do these stages occur?
Which best describes how a recession develops as demand and production decrease?
The recession feeds on itself.
Which best describes what is represented in the business cycle model?
macroeconomic trends
Which event best describes why it is difficult to sell a home during a recession?
Demand greatly decreases.
During a recession, what is one way governments try to encourage growth?
by stopping government spending
Which best describes the nature of cause and effect in the context of the business cycle?
Each effect has a cause
Which of the following conditions is most indicative of recovery?
The economy is growing again.
Income reaches the highest level at the __________ point of the business cycle.
What do these graphs indicate about the relationship between employment levels and prices during economic cycles?
Rising unemployment rates drive prices higher.
Which best describes how governments respond to changes in the business cycle?
Governments reduce spending.
Why might buying a home during a recession be a good decision for some consumers?
-Housing prices are down.
-Less demand means more options for buyers.
-Less demand means less competition with other buyers.
Which of the following is a characteristic of the prosperity phase of the business cycle?
high levels of production

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