The Business Cycle Flashcards
7 cards from real GDP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 The Business Cycle flashcards as text
Which phase of the business cycle is characterized by rising unemployment, falling consumer spending, and declining GDP?
Answer: Contraction
Contraction (also called recession) features rising unemployment, reduced consumer spending, and negative or slowing GDP growth.
The National Bureau of Economic Research (NBER) officially determines US recession dates based primarily on which criterion?
Answer: A broad decline in economic activity lasting more than a few months
NBER defines a recession as a significant decline in economic activity spread across the economy lasting more than a few months, not just two negative GDP quarters.
Which leading economic indicator is most commonly used to predict upcoming business cycle turning points?
Answer: New orders for consumer goods
New orders for consumer goods are a leading indicator because manufacturers respond to orders before production changes, signaling future economic direction.
During which business cycle phase would a firm most likely increase capital expenditures and hire new workers?
Answer: Expansion
During expansion, rising demand and business confidence encourage firms to invest in capital and add workers to meet growing output needs.
What is a 'jobless recovery' in the context of the business cycle?
Answer: GDP growth resuming after a trough while unemployment remains high
A jobless recovery occurs when GDP begins growing again after a recession but unemployment stays elevated as firms remain cautious about hiring.
Which sector of the US economy tends to be MOST cyclically sensitive and typically contracts sharply during recessions?
Answer: Durable goods manufacturing
Durable goods manufacturing is highly cyclical because consumers and businesses postpone purchases of long-lived items like cars and machinery during downturns.
In the business cycle, what term describes the low point between a contraction and the beginning of an expansion?
Answer: Trough
The trough is the lowest point of the business cycle, marking the end of contraction and the start of recovery/expansion.