What are five economic shocks that may cause business cycles?
What will be an ideal response?
There are at least five possible sources cited by economists. First, major innovations, such as the railroad and microchips, may cause growth in investment and spending, ultimately raising output and the price level. These events occur irregularly, which contributes to the variability of economic performance. Second, changes in productivity may contribute to instability in the economy and be the source of business cycle booms and busts. Third, large changes in monetary policy may be the source of business cycle fluctuations. Fourth, political events can require the economy to adjust to positive or negative opportunities that result in upswings or downswings in the economy. Fifth, financial instability can arise from the rapid rise in asset prices (financial bubbles) or abrupt declines in asset prices (financial bursts).
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During the early 1920s, Germany experienced
A) negative inflation as a result of high money creation. B) hyperinflation as a result of high money creation. C) moderate price changes as a result of a recession. D) hyperinflation as a result of rapidly increasing demand for money. E) hyperinflation as a result of low money creation.
When a new depositor opens a checking account at the First National Bank, the bank's assets ________ and its liabilities ________
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
Costs should always be evaluated before determining benefits.
A. True B. False C. Uncertain
There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be
a. elastic. b. unit elastic. c. inelastic. d. highly responsive to changes in income as well as changes in prices.