What is the primary reason that changes in total spending lead to cyclical changes in output and employment? Changes in total spending cause supply shocks that cause cyclical variation. Prices are flexible in the long run.
What do all economists agree about the cause of business cycle fluctuations?
C. Economists all agree that monetary changes are primarily responsible for business cycle fluctuations. D. There are a wide range of theories as to the underlying causes of business cycle movements.
How much will nominal income fall if the consumer price index rises?
Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will A. fall by about 20 percent.
How did the price level of 70 increase between 1980 and 2000?
A. dividing 70 into the annual rate of inflation. B. dividing the annual rate of inflation into 70. C. subtracting the annual change in nominal incomes from 70. D. multiplying the annual rate of inflation by 70. Between 1980 and 2000, the price level approximately doubled.
What are the reasons for cyclical unemployment?
Causes of Cyclical UnemploymentDecline in Demand. The main cause of cyclical unemployment occurs when demand throughout the economy declines. ... Negative multiplier effects. ... Market Crash. ... Falling Demand. ... Deflation. ... Declining Profits. ... Decreasing Productivity. ... Falling House Prices.More items...•
What happens to cyclical unemployment when government spending increases?
Expansionary Monetary Policy to Reduce Unemployment When it's easier to borrow money, people spend more money and invest more. This increases aggregate demand and GDP and decreases cyclical unemployment.
What is the immediate cause of business cycle variation?
Most economists agree that the immediate cause of most business cycle variation is: an unexpected change in the level of total spending.
In which phase of the business cycle will the economy most likely experience decreasing real output and increasing unemployment rates?
Phases and turning points of the business cyclePhase of cycleDescriptionExpansionWhen real GDP is increasing and unemployment is decreasingPeakThe turning point in the business cycle at which output stops increasing and starts decreasingRecessionWhen output is decreasing and unemployment is increasing1 more row
How can government spending affect the circular flow and the economy?
1. Government spending on goods and services is an injection into the circular flow of the economy. As government purchases rise the demand for GNP rises and, assuming that the economy is below full capacity, GNP produced will rise. The rise in GNP is larger than the rise in government spending.
What is the effect of cyclical unemployment on an economy?
Cyclical unemployment at its peak can lead to the following: Low production: During cyclical unemployment, consumer demand for goods decreases, leading to lower production of items across multiple industries. Less demand for services: Along with goods, certain services are no longer in demand for consumers.
What is the cyclical nature of business cycle?
A cyclical industry is a type of industry that is sensitive to the business cycle, such that revenues generally are higher in periods of economic prosperity and expansion and are lower in periods of economic downturn and contraction.
What factors are generally responsible for the occurrence of cycles?
Causes of Business Cycles1] Changes in Demand. Keynes economists believe that a change in demand causes a change in the economic activities. ... Browse more Topics under Business Cycles. ... 2] Fluctuations in Investments. ... 3] Macroeconomic Policies. ... 4] Supply of Money. ... 1] Wars. ... 2] Technology Shocks. ... 3] Natural Factors.More items...
Which of the following is considered the basic cause of the business cycle?
Study Question: What is the basic cause of the business cycle? Inflation and deflation causes a business cycle. As prices go up, spending goes down and as prices go down, spending goes up. There are four stages to a business cycle.
Which phase of a business cycle can lead an economy into recession?
Contraction is the phase that can lead country economy into recession. Contraction phase is a term that is describing an economic phase, phase of a business cycle, when real GDP is falling.
Which phase of the business cycle would most closely associated with an economic contraction?
A contraction generally occurs after the business cycle peaks, but before it becomes a trough. According to most economists, when a country's real gross domestic product (GDP)—the most-watched indicator of economic activity—has declined for two or more consecutive quarters, then a recession has occurred.
Which of the following is seen by economists as an underlying cause of business cycle fluctuations?
Most economists agree that the immediate cause of most business cycle variation is: an unexpected change in the level of total spending. If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced: deflation of 3.33 percent.
What are the two resources used to produce 50 units of output?
A. $0.67. 92. In an economy, only two resources, capital and labor , are used to produce 50 units of output. If the total cost of capital resources is $125 and the total cost of labor resources is $25, then the per unit production costs are:
How many resources are used to produce 600 million units?
Only two resources, capital and labor, are used in an economy to produce an output of 600 million units. If the total cost of capital resources is $300 million and the total cost of labor resources is $100 million, then the per-unit production costs in this economy are: 92.
