Answer the following statements true (T) or false (F)
1. Changes in the level of inventories are an internal force in the economy’s cyclical movements.
2. Cost changes generally lag behind price changes during the business cycle.
3. A recession occurs whenever there’s a decline in real GDP for two or more successive quarters.
4. Involuntary inventory accumulation may occur during the contracting phase of the business cycle.
5. Psychological forces have no effect on business fluctuations.
1. TRUE
2. TRUE
3. TRUE
4. TRUE
5. FALSE
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Economists normally
a. do not try to explain people's tastes, but they do try to explain what happens when tastes change b. believe that they must be able to explain people's tastes in order to explain what happens when tastes change. c. do not believe that people's tastes determine demand, so they ignore the subject of tastes. d. incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.
If changing the quantity produced from 10,000 to 10,001 causes total costs to increase by $15, the marginal cost at 10,000 must be $15
Indicate whether the statement is true or false
Explain why countries that have volatile inflation rates are likely to have high nominal interest rates.
What will be an ideal response?
You purchased two stocks that are perfectly negatively correlated
A) Your portfolio is well diversified, so you should face no risk whatsoever. B) Even though you diversified the idiosyncratic risk away, your portfolio is still affected by systemic risks like a stock market crash. C) Even though you diversified the systemic risk away, your portfolio is still affected by idiosyncratic risks like a stock market crash. D) Your portfolio is not diversified; thus you face no systemic risk.