Introduction

Introduction and definitions: Activities

1. The business cycle is the pattern of expansion and contraction in economic activity relative to its long-term trend.

Correct.  The statement is indeed true.

The business cycle is the pattern of expansion and contraction in economic activity relative to its long-term trend.

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Incorrect.  The statement is false.

The business cycle is the pattern of expansion and contraction in economic activity relative to its long-term trend.

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2. Each business cycle last exactly 5 years.

Incorrect.  The statement is false.

A business cycle can last for a few months to a few years.

Correct.  The statement is indeed false.

A business cycle can last for a few months to a few years.

3. A peak is a ____ turning point, whereas a trough is a _____ turning point.

Correct.

A peak is a high turning  point, whereas a trough is a low turning point.

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Incorrect.

A peak is a high turning  point, whereas a trough is a low turning point.

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4. During an upswing the level of economic activity ____, whereas in a downswing the level of economic activity _____.

Incorrect.

During an upswing the level of economic activity increases, whereas in a downswing the level of economic activity decreases.

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Correct.

During an upswing the level of economic activity increases, whereas in a downswing the level of economic activity decreases.

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5. A peak is followed by _____, and a trough is followed by _____ .

Incorrect.

A peak is followed by a contraction, and a trough is followed by an expansion.

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Correct.

A peak is followed by a contraction, and a trough is followed by an expansion.

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6. A reference cycle only includes a peak and a contraction phase.

Incorrect. The statement is false.

A reference cycle refers to a full cycle and it includes a peak, contraction, trough and expansion.  It is measured from peak to peak or trough to trough.

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Correct.  The statement is indeed false.

A reference cycle refers to a full cycle and it includes a peak, contraction, trough and expansion.  It is measured from peak to peak or trough to trough.

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7. The difference between a reference cycle and a specific cycle is that a reference cycle refers to aggregate economic activity, whereas a specific cycle relates to a specific time series only.

Correct.  The statement is indeed true.

A specific cycle refers to the cyclical movement of a specific time series such as real merchandise imports. A reference cycle refers to the cyclical movement of aggregate economic activity (which is an average of a number of specific cycles).

Incorrect.  The statement is true.

A specific cycle refers to the cyclical movement of a specific time series such as real merchandise imports. A reference cycle refers to the cyclical movement of aggregate economic activity (which is an average of a number of specific cycles).