$$\text{Inflation Rate} = \frac{P_{t} - P_{t-1}}{P_{t-1}} \times 100$$

Question 1

Which phase of the business cycle marks the beginning of a recovery?

Accepted Answer

Expansion

Question 2

During an expansion in the business cycle, what happens to production, income, and employment?

Accepted Answer

They increase

Question 3

Which of the following is a plausible cause of a business cycle fluctuation?

Accepted Answer

Irregular innovation

Question 4

What typically happens to unemployment during a recession?

Accepted Answer

Unemployment increases

Question 5

Which of the following best describes a 'jobless recovery'?

Accepted Answer

A period of expansion where the unemployment rate is still rising

Question 6

Unexpected changes in productivity can lead to:

Accepted Answer

Unexpected booms and busts

Question 7

Which of the following is NOT a typical cause of business cycle fluctuations?

Accepted Answer

Consistent consumer spending

Question 8

During expansions, what generally happens to inflation?

Accepted Answer

Inflation increases

Question 9

Which equation best represents the relationship between GDP and business cycle fluctuations?

Accepted Answer

$$\Delta GDP = GDP_{t} - GDP_{t-1}$$

Question 10

A burst in which market was a key factor in the 2008 recession?

Accepted Answer

Housing market

Question 11

Which of the following is a consequence of the business cycle?

Accepted Answer

Correlation with unemployment and inflation

Question 12

If the Federal Reserve unexpectedly increases interest rates, what is the likely short-run effect on the economy?

Accepted Answer

A contraction in production, income, and employment

Question 13

Which of the following best describes the business cycle?

Accepted Answer

Periodic increases and decreases in production, income, and employment

Question 14

What is the effect of a revolutionary technology (such as the internet) on the business cycle?

Accepted Answer

It leads to an economic boom shortly after its introduction

Question 15

During a contraction in the business cycle, what happens to production, income, and employment?

Accepted Answer

They decrease

Question 16

Which formula would you use to calculate the inflation rate during a business cycle?

Accepted Answer

$$	ext{Inflation Rate} = \frac{P_{t} - P_{t-1}}{P_{t-1}} 	imes 100$$

Question 17

Which of the following is an example of a shock that can cause a business cycle fluctuation?

Accepted Answer

Unexpected political events such as war or terrorism

Question 18

What happens to inflation during a recession?

Accepted Answer

Inflation decreases

Question 19

Which of the following best explains why business cycles are irregular?

Accepted Answer

Shocks to the standard flow of the economy

Question 20

If GDP fluctuates yearly, which term best describes these changes?

Accepted Answer

Business cycle fluctuations

Business Cycles and Short-Run Fluctuations in Macroeconomics

Study Guide - Practice Questions