CBE Business Cycles and Economic Indicators 1

Question 1

Which phase of the business cycle is characterized by peak economic activity, low unemployment, and high consumer spending followed by a turning point?

Accepted Answer

Peak

Answer

The peak is the highest point of economic activity in a business cycle, marking the end of expansion before contraction begins.

Question 2

The National Bureau of Economic Research (NBER) defines a recession as:

Accepted Answer

A significant decline in economic activity lasting more than a few months, visible across multiple sectors

Answer

The NBER uses a broader definition based on depth, diffusion, and duration across multiple economic measures, not just the two-quarter GDP rule.

Question 3

Which economist is most associated with the theory that business cycles are driven by waves of technological innovation and creative destruction?

Accepted Answer

Joseph Schumpeter

Answer

Joseph Schumpeter developed the theory of creative destruction and linked long business cycles to waves of technological innovation.

Question 4

During the contraction phase of a business cycle, which set of conditions typically occurs?

Accepted Answer

Declining output, rising unemployment, and reduced consumer spending

Answer

The contraction phase is defined by falling economic output, rising unemployment, and reduced consumer spending as activity slows from the peak.

Question 5

The Kitchin cycle, with an approximate period of 3–5 years, is primarily associated with which economic driver?

Accepted Answer

Inventory adjustments by businesses

Answer

The Kitchin cycle is driven by short-term inventory adjustments as firms respond to discrepancies between production and sales.

(CBE) Certified Business Economist Practice Test

(CBE) Certified Business Economist Practice Test

CBE Business Cycles and Economic Indicators 1