AnswersHSA 26-27 EconomicsThe Business Cycle

The Business Cycle Answers

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1
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Which of the following is a characteristic of prosperity in the peak phase of the business cycle?

s
stagnant prices
h
high levels of production
a
ambivalence about the economy
r
reduced incomes
2
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The graphs show the US unemployment rate and the price of whole milk between 2006 and 2012.

Question illustration
T
There is no link between prices and unemployment.
R
Rising unemployment rates drive prices higher.
F
Falling prices drive unemployment rates lower.
A
As unemployment rates rise, average prices fall.
3

Income reaches the highest level at the point of the business cycle.

Answer not available
4

Read a passage from a speech given by President Barack Obama.Because of this plan, families who are struggling to pay tuition costs will receive a $2,500 tax credit . . . And Americans who have lost their jobs in this recession will be able to receive extended unemployment benefits.–President Barack Obama, February 4, 2009

A
It describes government measures to stimulate demand and bring about a recovery.
B
It describes government measures to increase production and bring about a depression.
C
It describes a shift in government policies during a trough on the business cycle.
D
It describes a shift in government policies during a peak on the business cycle.
5

Which of the following conditions is most indicative of recovery?

A
The economy has stopped shrinking.
B
The economy begins to peak.
C
The GDP continues to shrink.
D
The economy is growing again.
6

During a recession, what is one way governments try to encourage growth?

b
by increasing unemployment benefits
b
by stopping government spending
b
by requiring firms to maintain production
b
by eliminating all tax breaks
7

There are five stages in a recession. 1. job loss2. falling production3. falling demand (occurs twice)4. peak production In which order do these stages occur?

4
4, 3, 2, 1, 3
3
3, 2, 1, 3, 4
4
4, 3, 2, 3, 1
4
4, 2, 3, 1, 3
8

When production is very high but demand is very low, it can lead to

a
a recession.
a
a recovery.
p
prosperity.
t
the peak.
9

This is a graph of the business cycle.Time is measured along the x-axis. What is measured along the y-axis?

Question illustration
A
employment levels
B
prices
C
economic output
D
demand
10

Which stage of the business cycle is an economy in when it reaches its low point?

A
Expansion
B
Peak
C
Contraction
D
Trough
11

Which indicators do economists use to determine the state of the economy? Choose three answers.pricesimmigration levelsagricultural outputemployment levelsgross domestic product (GDP)

A
prices
B
immigration levels
C
agricultural output
D
employment levels
E
gross domestic product (GDP)
12

Which best describes how a recession develops as demand and production decrease?

A
The recession enters a recovery period.
B
The recession slows.
C
The recession accelerates.
D
The recession starts and stops.
13

There are four stages in an economic recovery. 1. increased production2. rising demand (occurs twice)3. increased hiring In which order do these stages occur?

A
2, 1, 2, 3
B
3, 2, 1, 2
C
2, 3, 1, 2
D
2, 1, 3, 2
14

Which of the following is a characteristic of prosperity in the peak phase of the business cycle?

A
stagnant prices
B
high levels of production
C
ambivalence about the economy
D
reduced incomes
15

During a recession, what is one way governments try to encourage growth?

A
by increasing unemployment benefits
B
by stopping government spending
C
by requiring firms to maintain production
D
by eliminating all tax breaks
16

When production is very high but demand is very low, it can lead to

A
a recession.
B
a recovery.
C
prosperity.
D
the peak.
17

The graphs show the US unemployment rate and the price of whole milk between 2006 and 2012.

Question illustration
A
There is no link between prices and unemployment.
B
Rising unemployment rates drive prices higher.
C
Falling prices drive unemployment rates lower.
D
As unemployment rates rise, average prices fall.
18

best

C
Consumers spend less, causing worker layoffs.
D
Demand falls, causing production to stay at its peak.
A
A recession begins, causing consumers to spend more.
G
Goods are overproduced, causing a surplus in jobs.

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