What is the definition of the output gap?

It is simply actual GDP minus potential GDP.

What does the long-term growth trend show?

Output grows when cyclical fluctuations are ironed out.

Why bother studying the business cycle?

When we have growth in real output then ↑incomes and SOL↑

Does potential output exist?

I can't answer because potential output cannot be measured.

What is the definition of a recession.

This is where an economic contraction lasts two quarters.

What is Economic Growth?

An increase in the real output of an economy over time.

What is a governments goal in terms of the business cycle?

It is to reduce the intensity of economic fluctuations.

What are the stages of the business cycle?

Expansion, peak, contraction and trough.

What would you think if the business cycle showed a horizontal potential GDP line?

The economy is likely to stay the same in terms of real GDP

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The Business Cycle

14 termsStudBud Administration270 plays

Standard Level IB Economics chapter 8

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Questions 14

Answers

1
What is the definition of the output gap?
It is where the economy produces too much.
It is when the economy does not produce enough.
It is when actual GDP lies above potential GDP.
It is simply actual GDP minus potential GDP.
2
Which phase is the business cycle in when there is widespread unemployment?
A trough
A recession
A peak
A boom
3
What does the long-term growth trend show?
Output grows when cyclical fluctuations are ironed out.
It shows how well the economy is doing now.
A 45 degree line so that the wiggly line has a resting spot.
It shows the duration and intensity
4
What type of unemployment is included in the long-run trend line?
Frictional
Hopeless people
Natural
Structural
5
Why bother studying the business cycle?
It gives economists a sense of control. We like diagrams.
It allows politicians to boost.
We can anticipate possible increases in inflation.
When we have growth in real output then ↑incomes and SOL↑
6
Does potential output exist?
Who knows? That is like saying how long is a piece of string
there is nothing wrong with assuming the existence something
It will in the future
I can't answer because potential output cannot be measured.
7
What is the definition of a recession.
It is the same situation as Greece and Spain.
it is negative GDP
It is when the country runs out of medicine and school books
This is where an economic contraction lasts two quarters.
8
What does a peak mark the end of?
A recovery
A boom
An expansion
No jobs being available
9
Which stage of the business cycle is the economy in when there is falling real GDP?
A boom
A strong expansion
A contracion
A recession
10
What is another name for potential GDP?
Full employment GDP
What could-be GDP.
If only GDP
Productive possibility GDP
11
What is Economic Growth?
An increase in the real output of an economy over time.
It is when the value of the country's goods are up.
It is when there are mining projects and people buy more.
It is when people work really hard and firms make profit.
12
What is a governments goal in terms of the business cycle?
To make the trend rate upwards instead of downwards
To ensure there is no unemployment ever.
It is to reduce the intensity of economic fluctuations.
To get the economy into a peak or boom phase.
13
What are the stages of the business cycle?
Expansion, peak, contraction and trough.
Extension, recession, boom and trough
long term growth trend or potential GDP
14
What would you think if the business cycle showed a horizontal potential GDP line?
The economy will need some expansionary policies.
The economy is likely to stay the same in terms of real GDP
The Prime Minister and the Chancellor of the exchequer care.
The economy will not improve

The Business Cycle Flashcards | StudBud