Economic Factors and Business Cycles Flashcards

Which of the following is considered a leading economic indicator?

Answer: Building permits issued

Building permits are a leading indicator because they signal future construction activity and economic expansion before it occurs.

During which phase of the business cycle does unemployment typically reach its highest level?

Answer: Trough

Unemployment peaks at the trough of the business cycle, the lowest point of economic activity, before the economy begins to recover.

What does Gross Domestic Product (GDP) measure?

Answer: The total market value of all goods and services produced in a country during a specific period

GDP measures the total market value of all finished goods and services produced within a country's borders during a specific time period.

Which of the following is a lagging economic indicator?

Answer: Average duration of unemployment

Average duration of unemployment is a lagging indicator because it reflects the aftermath of economic changes rather than predicting them.

Stagflation is best described as a period of:

Answer: High inflation combined with high unemployment and stagnant growth

Stagflation occurs when high inflation and high unemployment exist simultaneously alongside stagnant economic growth, a difficult combination for policymakers.

The Consumer Price Index (CPI) is primarily used to measure:

Answer: Changes in the price level of a basket of consumer goods and services over time

The CPI tracks changes in the prices paid by urban consumers for a representative basket of goods and services, making it the primary measure of consumer inflation.

Which phase of the business cycle is characterized by rising GDP, increasing employment, and growing consumer spending?

Answer: Expansion

The expansion phase features increasing economic output, falling unemployment, and growing consumer and business spending as the economy grows.