Deck 12: Business Cycles

Question 1

What does the term, "discouraged worker," mean?

A) Someone who is unemployed.
B) Someone who wants to work but has given up looking for a job.
C) Someone who is working part-time but wants to work full-time.
D) Someone who does not like his or her job.

Answer 1

B

Question 2

Pablo was laid off from his job as a computer programmer 6 months ago. He drives a cab on weekends to make ends meet, while he looks for a new permanent job as a programmer.

A) Pablo is unemployed.
B) Pablo is employed.
C) Pablo is a discouraged worker.
D) Pablo is involuntarily unemployed.

Answer 2

B

Question 3

What's the difference between a recession and a depression?

A) A recession is accompanied by rising prices; a depression by falling prices.
B) A recession is a major expansion in economic activity; a depression is a contraction.
C) A recession is a small downturn in output and employment; a depression is a large downturn.
D) A recession lasts less than 3 quarters; a depression lasts longer than 3 quarters.

Answer 3

C

Question 4

Why is the economic downturn that occurred during the 1930s called the Great Depression?

A) Because it was the first recession experienced by the United States.
B) Because it was the last recession experienced by the United States.
C) Because it was the most severe recession ever experienced in the United States.
D) Because it was the shortest depression on record.

Question 5

Business cycles

A) occur in every type of economy.
B) occur only in capitalism.
C) occur in capitalism and feudalism.
D) occur only in socialism.

Question 6

What is a business cycle?

A) The length of time a business can sell a product before it becomes obsolete.
B) The length of time it takes a business to take a product from the development stage to the mass market stage.
C) The ups and downs of the economy as measured by GDP growth, employment and profits.
D) The response of the economy to disturbances resulting from outside shocks.

Question 7

What is an "expansion?"

A) An increase in economic activity measured by output, employment and profits.
B) An increase in market share by an oligopoly.
C) Foreign investment.
D) A new team in professional sports.

Question 8

What is a "contraction"?

A) A downturn in economic activity.
B) A loss of market share by a corporation.
C) Closing a factory resulting in a major layoff.
D) A credit crunch.

Question 9

During the twentieth century, the United States experienced approximately

A) 3 recessions.
B) 9 recessions.
C) 20 recessions.
D) 74 recessions.

Question 10

Robert Lucas, a well-known University of Chicago economist and winner of the 1995 Nobel Prize, argued that shocks to the economy come primarily from

A) forces internal to the capitalist system.
B) mistakes by government.
C) technological change.
D) major shifts in commodity prices.

Question 11

What is "real business cycle theory"?

A) Outside shocks disrupt the economy and require government action to stabilize expectations.
B) The most important shocks to the economy come from technological change.
C) The most important shocks to the economy come from government policy mistakes.
D) Business cycles are caused by the internal dynamics of capitalism.

Question 12

How are profits calculated?

A) Profits = Revenue-Costs
B) Profits = Revenue/Costs
C) Profits = Revenue-Taxes
D) Profits = Revenue + Costs

Question 13

According to Progressives, what is the most important factor in causing business cycles?

A) Business cycles are caused by external shocks to the economy.
B) Business cycles are caused by misguided government policies.
C) Business cycles are caused by the drive for profits.
D) Business cycles are caused by technological change.

Question 14

According to Progressives, what happens during a recovery?

A) There is a rapid rise in interest rates.
B) Revenues are falling due to rising costs.
C) Revenues are rising rapidly while costs are still low.
D) Consumers begin to save more to recover from the recession.

Question 15

According to Progressives, what causes the expansion to come to an end?

A) Profits are squeezed by rising costs and lower revenues.
B) Excessive exuberance leads to investment mistakes.
C) Outside shocks to the economy increase consumer spending.
D) Profits expand reducing money available for investment.

Question 16

According to Progressives, what is occurring at the peak of the cycle?

A) Slowdown in consumer spending, falling raw materials costs and falling production.
B) Increasing consumer spending, increasing raw materials costs and increasing production.
C) Slowdown in consumer spending, increasing raw materials costs and increasing production.
D) Rising profits, increasing labor income, rising costs.

Question 17

According to Progressives, what are the four phases of a business cycle?

A) Recovery, prosperity, crisis, recession
B) Recovery, expansion, contraction, recession
C) Recovery, peak, recession, depression.
D) Prosperity, crisis, peak, expansion