What appears to be the immediate cause of most changes in the business cycle from the perspective of most economists?
What will be an ideal response?
The immediate cause of the business cycle in real GDP and employment is unexpected changes in the level of total spending according to most economists. When total spending declines unexpectedly, businesses find that they can sell fewer of their products, prompting them to reduce current production and employment. The opposite occurs when unexpected spending increases. When prices are sticky and consumers purchase more products, businesses find it more profitable to increase current production to meet the demand and employ more workers.
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If Billy Bob's National Bank of Slingblade confronts a 10 percent reserve requirement and has excess reserves of $20,000, what is the maximum amount of additional loans that the bank can extend?
a. $2,000 b. $18,000 c. $20,000 d. $200,000
Changes in the interest rate
a. change business spending, but not consumption spending b. shift the consumption function c. cause a movement along the consumption function d. change consumption spending but not business spending e. have no impact on autonomous consumption or business spending
Consider a firm operating in a perfectly competitive market. At its current output of 200 units, marginal revenue is $25 . At this output, average total cost is decreasing and equals $22 . Given this information, what should the firm do? a. Continue to produce 200 units, because this maximizes profits
b. Increase output beyond 200 units, since a higher output will yield the profit maximizing output level. c. Decrease output below 200 units, since a lower output will result in the profit maximizing output level. d. More information is needed to determine the firm's next step.
Will and Grace have adjoining unfenced back yards and each has just adopted a new puppy. Will values a fence between their yards at $250 and Grace values a fence between their yards at $200. The cost of building the fence is $300, which will be split equally if they both agree to build the fence. Therefore, their payoff matrix is as follows. If Will decides to build the fence, then Grace will earn a higher payoff by ________, and if Will decides to not build the fence, then Grace will earn a higher payoff by ________.
A. not helping to build the fence; also not building the fence B. helping to build the fence; also not building the fence C. not helping to build the fence; building the fence D. helping to build the fence; building the fence