Why is a high rate of inflation generally considered harmful to the economy?
Creates uncertainty. Higher rates of inflation are disliked by business because it makes it more difficult to predict future costs. Therefore investment will be lower. Countries with lower inflation rates generally have poorer economic growth.
Is the phase in which unemployment begins to decrease demand for goods and services increases and GDP begins to rise again?
POB – Lesson 1 and 2 Review
| A | B |
|---|---|
| Recovery | The phase in which unemployment decreases, demand for goods and services increases, and GDP begins to rise. |
| Inflation: | An increase in the general price level |
| Stock | Represents ownership in a corporation |
| Budget Index | Government spends more than it takes in |
What is the phase of the business cycle in which unemployment is highest?
The trough is the bottom of the recession period, unemployment is at its highest, inflation is low.
What are the stages of business cycle?
What is an economic cycle? An economic cycle, also referred to as a business cycle, has four stages: expansion, peak, contraction, and trough.
What is it called when GDP figures decline but prices rise?
Stagflation is called when GDP figures decline but prices rise.
Which of the following is not the features of business cycle?
Business cycles occur periodically though they do not exhibit the same regularity. Explanation: The sequence of changes that take place in the business cycle occurs again and again but are not periodic in nature.
What are the main features of business cycle?
The cycle is generally divided into four segments. It is also known as the features and phases of business cycles. They are expansion, peak, contraction, and trough. The monetary policy of any nation changes the economic cycle.
Which of the following is correct sequence of business cycle?
The business cycle goes through four major phases: expansion, peak, contraction, and trough.
What is the importance of business cycle?
When running a business, understanding business cycles is essential to success. Sometimes referred to as a trade or economic cycle, a business cycle is the measured expansion and contraction of economic growth within a period. With a clear understanding of business cycles, business owners can make informed decisions.
Where is the economy in the business cycle?
In general, the typical business cycle demonstrates the following: During the typical early-cycle phase, the economy bottoms out and picks up steam until it exits recession then begins the recovery as activity accelerates.
What are two ways governments influence business cycles?
The government has two tools at its disposal to moderate the short-term fluctuations of the business cycle—fiscal policy or monetary policy. Fiscal policy refers to changes in the budget deficit. Monetary policy refers to changes in short-term interest rates by the Federal Reserve.
How is capital deepening related to economic growth?
Capital deepening increases the marginal product of labor – i.e., it makes labor more productive (because there are now more units of capital per worker). Capital deepening typically increases output through technological improvements (such as a faster copier) that enable higher output per worker.
What happens to the economy when inflation rises?
If inflation becomes too high, the economy can suffer; conversely, if inflation is controlled and at reasonable levels, the economy may prosper. With controlled, lower inflation, employment increases. Consumers have more money to buy goods and services, and the economy benefits and grows.
What are the 3 effects of inflation?
Section 3: Harmful Effects of Inflation
- Higher interest rates. Inflation leads to higher interest rates in the long run.
- Lower exports. Higher prices of goods mean that other countries will find it less attractive to purchase our goods.
- Lower savings.
- Mal-investments.
- Inefficient government spending.
- Tax increases.