Macroeconomic Fluctuations and Policy Implications Quiz

Economic downturn marked by a sustained decrease in GDP for two consecutive quarters.

A recession is characterized by a sustained period of economic decline, typically measured by two consecutive quarters of negative GDP growth.

Fiscal policy involves government decisions on spending and taxation to influence economic conditions.

GDP is a primary indicator used to measure the total value of goods and services produced within a country's borders over a specific period.

Economic expansion is characterized by increasing employment levels as businesses expand production to meet rising demand.

Household savings are not directly included in GDP calculations, which primarily comprise consumption, investment, government spending, and net exports.

Monetary policy aims to boost economic activity during downturns by stimulating growth through various measures.

Central banks primarily use interest rates, open market operations, and reserve requirements, not fiscal policy adjustments, to implement monetary policy.

Stagflation refers to a rare economic scenario characterized by simultaneous high inflation, high unemployment, and stagnant economic growth.

During the peak phase of the economic cycle, policymakers prioritize controlling inflation to prevent overheating in the economy.

Keynesian economics advocates for government intervention to mitigate economic downturns through fiscal and monetary policies.

Consumer confidence tends to decline during a recession due to economic uncertainty and reduced spending.

Monetarism posits that variations in the money supply are the primary determinants of interest rates in an economy.

Inflation typically rises during economic expansion as demand for goods and services outpaces supply.

Technological advancements generally contribute to long-term economic growth rather than short-term fluctuations.

Fiscal policy primarily aims to influence economic activity through government spending and taxation, not the regulation of the money supply.

Stagflation describes an economic condition characterized by high inflation, sluggish economic growth, and high unemployment, which is difficult to address using traditional policy measures.