Question

1.Which of the following are characteristics of a peak in the business cycle?

a.Businesses begin rehiring full-time workers and ordering heavy equipment, and inflation begins to pick up.

b.Economic activity shows a decelerating rate of growth, businesses slow hiring, and capital spending rate of growth slows.

c.GDP growth turns positive, layoffs slow, and inflation remains moderate.

2.Which school of thought is associated with the belief that the boom bust pattern of the business cycle is largely due to misguided government policies especially monetary policy?

a.Austrians

b.Keynesians

c.Monetarists

3.

Which is the closest definition of disinflation?

a.A positive but declining rate of inflation.

b.A negative rate of inflation.

c. stable rate of inflation, either positive or negative.

4.

Which of the following would most likely cause higher inflation?

Increased interest rates brought about by open market operations

Higher industrial input prices accommodated with an increase in the money supply

Recession

5.

Relative to the overall economy, unemployment is:

A coincident indicator

A leading indicator

A lagging indicator

6.

Which of the following would most likely cause a recession?

Expansionary fiscal policy.

Fall in consumer confidence.

Lower interest rates.

7.

Deflation is most likely to be associated with:

Substantial macroeconomic contraction.

Expansionary monetary policy.

An increase in government spending.

Answer 1

1) :-b is right optionEconomic activity shows a decelerating rate of growth, businesses slow hiring, and capital spending rate of growth slows.

characteristics of a peak

1. GDP growth rate decreases
2. Unemployment rate decreases but hiring slows
3. Consumer spending a business investment grow at slower rates
4. Inflation rate increases.

2) :- C is right option monetarist.

Due to variations in the rate of growth of the money supply, likely from inappropriate decisions by monetary authorities.

3) :-a is right option. .A positive but declining rate of inflation.

•it is a falling rate of inflation, which is referred to as disinflation but it is positive in nature.

4) :- b is right optionHigher industrial input prices accommodated with an increase in the money supplywould most likely cause higher inflation

•causes of inflation?

1. demand pull inflation
2. cost push inflation
3. excess monetary growth inflation

cost push inflation

- general price levels rise (inflation) due to increases in the cost of wages and raw materials.
- fewer goods being produced (supply weakens) and demand for these goods remains consistent, the prices of finished goods increase (inflation).