ASU ECN 211 Exam 3 with 100% correct answers

What is a recession? - correct answer economic contraction; two straight quarters of negative GDP growth What is a boom? - correct answer economic expansion; boom length does not predict a recession What are the characteristics of a good economy? - correct answer lots of job openings, firms are raising wages to attract workers, asset values are rising, consumers borrow and spend money freely What are the characteristics of a bad economy? - correct answer new job openings are scarce, firms not seeking new employees, asset prices fall, consumers try to save money business cycle - correct answer Alternating periods of economic expansion and economic recession Unemployment rates in the business cycle... - correct answer are a lagging indicator; when a recession occurs, employment may stay low for awhile Why do economies fluctuate? - correct answer a change in supply or demand Demand side recession - correct answer Changes in willingness of consumers and firms to spend causes fluctuations in GDP Supply side recession - correct answer Rare, large events like earthquakes, plagues, wars, oil shocks Say's Law - correct answer supply creates its own demand (if you buy something someone will want to buy it) Keynes Theory - correct answer Recession caused by business and consumers hoarding cash; explained the Great Depression