Quick Answer: Which Best Describes Nature Of Cause And Effect In The Context Of The Business Cycle?

How does GDP affect business cycle?

The business cycle model shows how a nation’s real GDP fluctuates over time, going through phases as aggregate output increases and decreases.

Over the long-run, the business cycle shows a steady increase in potential output in a growing economy..

What is the source of the supply of loanable funds?

The supply of loanable funds is based on savings. The demand for loanable funds is based on borrowing. The interaction between the supply of savings and the demand for loans determines the real interest rate and how much is loaned out.

What are the 5 causes of the business cycle?

Causes of the business cycleInterest rates. Changes in the interest rate affect consumer spending and economic growth. … Changes in house prices. … Consumer and business confidence. … Multiplier effect. … Accelerator effect. … Lending/finance cycle. … Inventory cycle. … Real business cycle theories.

What are the 4 phases of business cycle?

The four stages of the economic cycle are also referred to as the business cycle. These four stages are expansion, peak, contraction, and trough. During the expansion phase, the economy experiences relatively rapid growth, interest rates tend to be low, production increases, and inflationary pressures build.

What best describes the nature of cause and effect in the context of the business cycle?

Answer Expert Verified. The option that best describes the nature of the cause and effect in the context of the business cycle is A. Each effect has other effects.

Which of the following is a characteristic of prosperity phase of the business cycle?

One of the defining characteristics of the prosperity stage in the business cycle is low level of unemployment. Additionally, a prosperous economy experiences relatively high levels of consumer demand and production, matched with increased buying power for much of the population.

What are the causes of the business cycle?

The business cycle is caused by the forces of supply and demand—the movement of the gross domestic product GDP—the availability of capital, and expectations about the future. This cycle is generally separated into four distinct segments, expansion, peak, contraction, and trough.

What is measured along the y axis?

In the y-axis is measured the level of real output or Gross Domestic Product (GDP).

What is business cycle diagram?

Business cycles are characterized by boom in one period and collapse in the subsequent period in the economic activities of a country. … These fluctuations in the economic activities are termed as phases of business cycles. The fluctuations are compared with ebb and flow.

What are the four factors that affect the business cycle?

Variables affecting the business cycle include marketing, finances, competition and time.Finances. Sales growth is usually slow during the introductory stage of the business cycle because the consumer market needs time to learn about and consider buying the product. … Marketing. … Competition. … Time.