Managing the flow of income

Label the economic cycle

a

b

c

d

e

f

g

desired economic activity

downswing

upswing

boom

Economic Activity

Time

trough

Match the following

• peak

• trough

• contraction

• downswing

• recovery

• upswing

• recession

• boom

Match the following

• upswing

• high unemployment, reduced inflation, low consumer confidence

• recession

• slowing down in aggregate output and income levels

• downswing

• when people try to save more. in times of recession which leads to a fall in AD

• paradox of thrift

• full emoployment, inflationary pressure, high demand

• boom

• increasing confidence, increasing economic activity

The economy does not fluctuate over time

• True

• False

• Who cares

Categorise the following

Groups:

(a) boom

,

(b) trough

• high inflation

• low unemployment

• low inflation

• high unemployment

• growth in real GDP

• decrease in real GDP

Forecasts of the cycle phases are the basis of appropriate policy responses

• True

• False

• Who cares

If the economy is heating up (expanding) rapidly, which government responses are appropriate

(more than one)

• increased interest rates

• decreased interest rates

• increased taxes

• decreased taxes

• relaxation of migration laws

If the economy is contracting, what are some appropriate government responses?

(more than one)

• decrease taxes

• decrease government spending

• increase interest rates

• increase goverment spending

• decrease interest rates

During a recession people sometimes try to save. These savings may sometimes end up making the economy much worse as there is less spending and a fall in aggregate demand and a fall in economic growth. This phenomena is called the _______ __ ______

A recession is technically two consecutive periods of negative economic growth

• True

• False

• Don't care