Economic Cycles and Indicators Quiz

Equilibrium is not a recognized phase; the business cycle consists of expansion, peak, contraction, and trough.

A recession is officially declared when GDP contracts for two consecutive quarters.

GDP includes consumption, investment, government spending, but imports are not a direct component.

A recession is declared when an economy contracts for two consecutive quarters.

Deflation is the persistent decrease in the general price level of goods and services.

CPI measures inflation by tracking changes in the cost of a representative basket of goods and services.

During a recession, economic activity contracts, leading to higher unemployment rates.

The Federal Reserve manages monetary policy, controlling money supply and interest rates to achieve economic goals.

Lagging indicators, like average hours worked, follow changes in the economy and confirm trends.

Inflation refers to the continuous rise in the overall price level of goods and services.

GDP is a lagging indicator; leading indicators precede economic changes.

An inverted yield curve suggests that short-term interest rates are higher than long-term rates, signaling a potential economic downturn.