AnswersHSA 26-27 EconomicsThe Business Cycle

The Business Cycle Answers

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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.
2
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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
3

Which event most likely explains renewed demand in a recovery period?

C
Consumers choose to save more and spend less.
E
Economic policy renews consumer confidence and demand.
P
Producers decrease prices to prompt demand and recovery.
P
Production decreases to prompt increased demand.
4

Which statement best describes why it is difficult to sell a home during a recession?

M
Mortgage rates are high.
D
Demand greatly decreases.
M
Mortgages become unavailable.
H
Housing prices increase.
5

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
6

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
7

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T
The recession enters a recovery period.
T
The recession slows.
T
The recession accelerates.
T
The recession starts and stops.
8

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
9

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C
Car dealerships have minimal overstock.
C
Car dealerships are not restocking.
C
Car dealerships cannot sell their stock.
C
Car dealerships cannot obtain stock.
10

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.
11

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?

A
4, 3, 2, 1, 3
B
3, 2, 1, 3, 4
C
4, 3, 2, 3, 1
D
4, 2, 3, 1, 3
12

Which best describes what is represented in the business cycle model?

A
the interactions between producers and consumers
B
the change in production cost
C
macroeconomic trends
D
supply and demand trends
13

Which best describes the nature of cause and effect in the context of the business cycle?

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

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
16

Which statement best describes why it is difficult to sell a home during a recession?

A
Mortgage rates are high.
B
Demand greatly decreases.
C
Mortgages become unavailable.
D
Housing prices increase.
17

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.
18

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.
19

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
20

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

A
Expansion
B
Peak
C
Contraction
D
Trough

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