How are unemployment, inflation, and the business cycle related?
What will be an ideal response?
A recessionary phase of a business cycle usually begins with decreased investment spending by firms or with reductions in consumption spending. As spending decreases firms' sales decrease, and firms begin laying off workers, thereby increasing unemployment. As firms find it more difficult to sell their goods they will also find it more difficult to raise prices and the rate of inflation will be relatively low. As the economy moves toward the expansionary phase of the business cycle firms begin to increase investment spending, households begin to increase their spending, and unemployment begins to fall. As spending increases producers find it easier to raise prices and the rate of inflation tends to rise during this expansionary phase.
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In the short-run, an increase in government purchases will cause
A) a shift of the DD curve to the left and an increase in output. B) a shift of the DD curve to the right and a decrease in output. C) a shift of the DD curve to the left and a decrease in output. D) a shift of the DD curve to the right and an increase in output. E) a shift of the DD curve the left and an appreciation of the currency.
What portion of the demand curve will profit-maximizing monopolists choose to operate on: the inelastic portion or elastic portion? Why?
Warren Buffett feared gaining weight. To keep himself from eating too much, he gave unsigned checks for $10,000 to his children, promising to sign them if he exceeded his desired weight by a certain date. This is an example of:
A. sunk costs. B. an abductive decision. C. an inductive decision. D. a precommitment strategy.
Can a monopolist that can charge only one price maximize its profit at a quantity that is equal to the quantity produced if the industry were perfectly competitive?
A. No. Never. B. Yes, if the fixed costs are zero. C. Yes, if the marginal costs are zero. D. Yes, if the total costs are zero.