ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the economy is in a slow down
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the government needs to address the unemployment problem
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the economy is in the expansion phase of a business cycle
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the Fed should expand the money supply
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Detailed explanation-1: -What would you conclude about an economy characterized by increasing real gross domestic product (GDP), low unemployment, and increasing inflationary pressures? A. This economy is in a slowdown.
Detailed explanation-2: -Consider a recession, a period of low economic activity. With lower demand for goods and services, firms start laying off workers and at the same time refrain from raising prices. So unemployment rises and inflation falls during recessions.
Detailed explanation-3: -One version of Okun’s law has stated very simply that when unemployment falls by 1%, gross national product (GNP) rises by 3%. Another version of Okun’s law focuses on a relationship between unemployment and GDP, whereby a percentage increase in unemployment causes a 2% fall in GDP.
Detailed explanation-4: -Investopedia / Laura Porter. A recession is a significant, widespread, and prolonged downturn in economic activity. A common rule of thumb is that two consecutive quarters of negative gross domestic product (GDP) growth mean recession, although more complex formulas are also used.