GDP The Business Cycle 2

Question 1

Which phase of the business cycle is characterized by rising unemployment, falling consumer spending, and declining GDP?

Accepted Answer

Contraction

Answer

Contraction (also called recession) features rising unemployment, reduced consumer spending, and negative or slowing GDP growth.

Question 2

The National Bureau of Economic Research (NBER) officially determines US recession dates based primarily on which criterion?

Accepted Answer

A broad decline in economic activity lasting more than a few months

Answer

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.

Question 3

Which leading economic indicator is most commonly used to predict upcoming business cycle turning points?

Accepted Answer

New orders for consumer goods

Answer

New orders for consumer goods are a leading indicator because manufacturers respond to orders before production changes, signaling future economic direction.

Question 4

During which business cycle phase would a firm most likely increase capital expenditures and hire new workers?

Accepted Answer

Expansion

Answer

During expansion, rising demand and business confidence encourage firms to invest in capital and add workers to meet growing output needs.

Question 5

What is a 'jobless recovery' in the context of the business cycle?

Accepted Answer

GDP growth resuming after a trough while unemployment remains high

Answer

A jobless recovery occurs when GDP begins growing again after a recession but unemployment stays elevated as firms remain cautious about hiring.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP The Business Cycle 2