#1
Which of the following is NOT a potential cause of an economic downturn?
Increased government spending
ExplanationContrary to common belief, increased government spending is not typically a cause of economic downturns.
#2
What is the term for a severe and prolonged economic downturn characterized by high unemployment and stagnant economic growth?
Depression
ExplanationDepression is a severe and prolonged economic downturn with significant negative effects.
#3
In which phase of the business cycle are economic downturns most likely to occur?
Trough
ExplanationEconomic downturns typically occur during the trough phase of the business cycle, preceding recovery.
#4
Which of the following is NOT a typical consequence of an economic downturn?
Rise in consumer confidence
ExplanationEconomic downturns typically lead to a decrease, not an increase, in consumer confidence.
#5
What is the term for a period of declining economic activity spread across the economy lasting more than a few months?
Recession
ExplanationA recession is characterized by a sustained period of economic decline across various sectors.
#6
What is the primary indicator used to determine if an economy is experiencing a recession?
Gross Domestic Product (GDP) growth rate
ExplanationA negative GDP growth rate over two consecutive quarters typically indicates a recession.
#7
During an economic downturn, what effect might a decrease in business investment have on the economy?
Decrease in productivity
ExplanationLess investment in businesses can lead to decreased productivity, affecting overall economic output.
#8
What role does consumer confidence play in economic downturns?
It can exacerbate the downturn by reducing spending
ExplanationLow consumer confidence can lead to decreased spending, further dampening economic activity.
#9
How can a decrease in exports contribute to an economic downturn?
It leads to job losses in export-dependent industries
ExplanationReduced exports result in job losses in sectors reliant on international trade.
#10
What is the term used to describe a sudden and severe economic downturn that typically lasts for a short period?
Crash
ExplanationA crash refers to a sudden and severe economic downturn, often accompanied by panic.
#11
Which of the following is a potential consequence of prolonged economic downturns?
Rise in income inequality
ExplanationExtended economic downturns can exacerbate income inequality within societies.
#12
How might a central bank typically respond to an economic downturn?
Lowering interest rates
ExplanationLowering interest rates can stimulate borrowing and spending, aiding economic recovery.
#13
How might an increase in government regulation contribute to an economic downturn?
It increases costs for businesses, reducing profitability
ExplanationExcessive regulation can raise costs for businesses, hindering profitability and growth.
#14
During an economic downturn, what is a common strategy businesses may employ to cut costs?
Reduce workforce
ExplanationTo reduce expenses, businesses often resort to workforce reductions during economic downturns.
#15
How can a decrease in housing prices contribute to an economic downturn?
It can trigger a decline in construction and related industries
ExplanationLower housing prices can lead to reduced investment and employment in construction and related sectors.