Describe the major features of the business cycle. Be sure to discuss what variables are affected by the cycle, a description of the key features that are apparent in the data, how variables are related to one another, how regular the cycle is, and
how predictable the cycle is.
The business cycle is defined as a fluctuation of aggregate economic activity. There are recurrent but not periodic movements of aggregate activity, with many variables moving in the same direction at the same time (comovement). Increases in aggregate economic activity are expansions, while reductions in aggregate economic activity are contractions, or recessions. Both expansions and contractions exhibit persistence, so once an expansion or contraction begins, it tends to last some time.
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Inflation makes it difficult to distinguish relative price changes from changes in the general level of prices. Consequently, inflation ________ the efficiency of the market system.
A. decreases B. does not change C. increases D. may either increase or decrease
Refer to the table above. If the market for notebooks is perfectly competitive, the equilibrium quantity is:
A) 2 units. B) 3 units. C) 4 units. D) 5 units.
The “random walk” theory
A. has been widely used by stock brokers to advise clients about stock purchases. B. implies that stock prices can easily be predicted by stock analysts. C. implies that rumors, news, and other “signals” have an effect on stock prices. D. implies that a stock’s past performance is an excellent predictor of its future performance.
Josiah installed a metal sculpture in his front yard. A negative externality arises if the sculpture a. increases the value of other properties in the neighborhood. b. decreases the value of Josiah's home
c. is visually appealing to Josiah's neighbors. d. creates a safety hazard for neighborhood children.