Unit 3 business cycle

The business cycle ALPINE SKI HOUSE PRE READING 1 What is a cycle? A set of events or actions that happen again and again in the same order 2 What are some events that occur in cycles? Weather, calend.

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The business cycleInsert image

PRE READING

1 What is a cycle?

- A set of events or actions that happen again and again in the same order

2 What are some events that occur in cycles?

- Weather, calendar, climate changes, time, seasons, etc.

Economy also moves in cycles Sometimes it grows and other times it decreases.

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READING

EXERCISE 1

1 How is the business cycle defined?

2 Why is the business cycle important?

- Because it provides the starting point for understanding the complex relationships between the various measures of

macroeconomic performance and the role of government economic policy

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3 What are the four phases of the business

4 How is economic growth characterized?

- Economic growth is characterized as higher household income, lower unemployment, and higher

profits for businesses

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7 What is meant by a recession?

- A recession is a contraction that lasts for six months or more./ A recession is a decrease in real GDP

for six months or more

8 When does a depression take place?

- When the recession is very long and very severe, then it's referred to as a depression.

9 What is a trough?

- It is the lowest point of the contraction.

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10. What are the factors affecting the business

cycle?

- The investment by businesses

- The current interest rates

- Optimism

- Outside sources.

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phase s

The business cycle

recessio n

Fill in each blank with a suitable word/phrase from the above reading passage.

1. If a business cycle begins with a contraction, what is the order of the ……… of the

variables

depressio n

unemployment

trough

4. The business cycle is the fluctuations in the general level of economic activity as measured by

such ……… as the rate of unemployment and changes in real GDP

5. A ……… is a very deep and prolonged recession

6. During a contraction you would see lower household income, lower business profits, and a higher

……… rate

7. The bottom of the contraction phase is referred to as the ………

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expansion

interest rates

8. After the downturn reaches bottom and economic conditions begin to improve, the economy

enters the ……… phase of the cycle

9. Lower ……… encourage consumers to borrow money – for example, to buy cars

or homes, and businesses to invest and expand

10.A ……… occurs when the real GDP reaches its maximum, stop rising, and

begins to decline

peak

During expansion, unemployment rate will be low

During contraction, unemployment rate will be high

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EXERCISE 5

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EXERCISE 5

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1. The business cycle is a graph which shows the level of real GDP over time.

2. The trend line is part of the business cycle.

3. Assuming the country is achieving economic growth over the long-run, the trend line will slope upwards.

4. A bust period occurs when GDP is rising at a rate faster than the long-run trend.

5. A peak marks the beginning of the decline in the nation's output.

T F

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EXERCISE 7 (IN QUIZIZZ)

1 The trough of a business cycle occurs when hits its lowest point.

A inflation

B the money supply

C aggregate economic activity

D the unemployment rate

2 When aggregate economic activity is increasing, the economy is said to be in ……

3 When aggregate economic activity is declining, the economy is said to be in

A a contraction

B an expansion

C a trough

D a turning point

4 Economists use the term "business cycle" to refer to

A fluctuations in real GDP over time

B the amount of time businesses take to recover their fixed costs

C changes in the unemployment rate caused by the hiring and firing of employees.

D fluctuations in firms' stock prices over time

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5 Layoffs are slow, but new hiring has not yet occurred and the unemployment rate remains high At first, business turns to overtime and temporary employees to meet rising product demands This is a characteristic of the phase.

A trough

B expansion

C peak

D contraction

6 The business cycle is not transmitted from one country to another through

A private sector imports and exports

B economic policy

C the duration of compulsory education

D labour supply changes

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7 The business cycle describes fluctuations in output around the

A short-run fluctuations in output

B trend path of output

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9 The four phases of the business cycle are …

A peak, contraction, trough and expansion.

B peak, recession, trough and expansion

C peak, depression, trough and expansion

D peak, depression, contraction and expansion

10 What is the definition of a recession?

A A decrease in nominal GDP for 2 consecutive quarters

B A decrease in real GDP for at least 6 consecutive months

C A decrease in real GDP for 3 consecutive months

D A decrease in nominal GDP for at least 6 consecutive months

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11 Which of the following describes the phase of a business cycle that occurs after a trough and before a peak?

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EXERCISE 8

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