ECON 2 Lecture Notes - Lecture 10: Business Cycle, Money Supply, The Trough

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bronzetrout891

7 Nov 2016

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The ups and downs of business and economic activities. Expansion and recession in the economy (gdp goes up or down, respectively) P stands for peak, and a major concern is inflation. An action that could slow inflation would be lowering money supply, which raises interest rates, which in turn lowers investment. Another solution would be to raise taxes, which also lowers disposable income, and then lowers consumption. The government can also lower its own spending to bring down the gdp. As the gdp lowers, the economy enters a recessionary state, or r. At the lowest point of the business cycle is t, or trough. Creating jobs is a must, which means increasing money supply, lowering taxes, and increasing government spending. The gdp then begins to strengthen and go up again. Finally is the trend line, which represents the rate of economic growth in the long run.

Related Questions

The average propensity to consume (APC) equals

the change in real disposable income divided by the change in consumption expenditures.

the change in consumption expenditures divided by the change in real disposable income.

real disposable income divided by consumption expenditures.

consumption expenditures divided by real disposable income.

The consumption function shows how much

households plan to consume per year at each level of real disposable income.

households plan to consume per year at each level of savings.

households plan to consume per year at each possible interest rate.

real disposable income people will earn at each income tax bracket.

Saving is

the accumulation of past periods of savings while savings is the amount of disposable income that is not consumed in a given period of time.

the amount one does not consume in a given period of time while savings is the accumulation of past periods of saving.

the difference between disposable income and spending on goods and services while savings is the difference between real GDP and disposable income.

the difference between real GDP and disposable income while savings is the difference between disposable income and consumption spending.

Thinking as an economist would, which is true of investment?

		Investment represents spending on capital goods.
		Investment is a stock concept.
		Investment is putting money into stocks and bonds.
		It is the portion of disposable income that is not used for consumption or saving.

An appreciation of the U.S. dollar ________ the price of U.S. imports, and ________ the price of U.S. exports.

		lowers, lowers
		increases, increases
		increases, lowers
		lowers, increases

QUESTION 33

Other things being equal, if input prices rise in a country, then there would be

		cost-push inflation.
		demand-pull inflation.
		cost-push deflation.
		more production and a lower price level.

mauvetortoise195

According to classical economists, which one of the following is the correct (recommended) sequence of occurrences?

A.	The economy is in a recession, production falls and unemployment rises ==> the government increases spending, the money supply, and lowers taxes ==> total spending rises ==> employment rises ==> GDP rises

B.	The economy is in a recession, production falls and unemployment rises ==> prices, wages, and interest rates decrease ==> business costs fall, profits rise, borrowing and consumer spending rise ==> employment and production rise ==> GDP rises

C.	The economy is in an expansion, incomes are rising and production increases ==> the government decreases spending ==> less inflation ==> the economy continues to expand

D.	The economy is in a recession, production falls and unemployment rises ==> spending falls ==> more layoffs ==> less production ==> more layoffs ==> deeper recession

E.	The economy is in an expansion ==> prices rise ==> consumer spending falls ==> production falls ==> the economy contracts (recession)

rubycod481

Since the United States has negative net foreignâ investment, its

A. net capital flow must be negative.

B. domestic saving must be less than its domestic investment.

C. exports must be greater than its imports.

D. domestic investment must be less than its domestic saving.

Expansionary fiscal policy is less effective in an open economy because

A. increases in the money supply will reduce interest rates and lower the value of theâ dollar, reducing aggregate demand.

B. increases in government spending can increase interestâ rates, which increases the value of the dollar and crowds out net exports.

C. increases in government spending will be partly spent on importedâ goods, which do not benefit the domestic economy.

D. increases in taxes reduceâ consumption, which in turn reduces consumption of imports and increases net exports.

When the Federal reserve uses contractionary monetary policy to reduceâ inflation, it

A. sells treasury securities increasing interestâ rates, leading to a stronger dollar that lowers net exports in an open economy.

B. buys treasury securities decreasing interestâ rates, leading to a weaker dollar that lowers consumption of durables in a closed economy.

C. sells treasury securities decreasing interestâ rates, leading to a stronger dollar that lowers domestic investment in a closed economy.

D. buys treasury securities increasing interestâ rates, leading to a weaker dollar that increases net exports in an open economy.

If a country saves more than it investsâ domestically, then its net foreign investment must be (positive, negative, or zero)?

ECON 2 Lecture Notes - Lecture 10: Business Cycle, Money Supply, The Trough

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