Boom and Bust Quiz

Economist Barnard J. notes that high inflation is boosting interest rates. Increasingly, consumers seem to be purchasing imported goods rather than American-made goods. Which phase of the business cycle is Barnard MOST LIKELY to be observing?

• Peak
• Expansion
• Trough
• Recession

Economics student Sylvia B. was recently overheard making the comment, “Well, if you’ve seen one business cycle, you’ve pretty much seen them all.” Which of the following is the MOST ACCURATE appraisal of Sylvia’s observation?

• It is totally unsubstantiated since business cycles are all highly individualistic.
• It could well be true within her lifetime, though since the nineteenth century, business cycles have displayed several different patterns.
• It is pretty much accurate; business cycles tend to fit a predictable four-phase pattern.
• It reflects the accepted view of today’s economists that business cycles are gradually stabilizing.

Most economists today—even those who totally disagree with Marxist philosophy — hold a certain respect for Marx’s economic perspectives. This is MOST LIKELY because:

• most of Marx’s predictions have come true, pretty much in the way he said they would.
• most economists today are strong labor sympathizers.
• Marx was the first to recognize the inherent dangers of government intervention.
• Marx was the first to conceptualize a business cycle in which good times eventually produced bad, and vice versa.

Which of these BEST summarizes the economic costs to society for tolerating a given level of unemployment? It is the difference between:

• the vertical phase of the aggregate supply curve and the horizontal phase.
• the peak phase of the business cycle and the trough phase.
• real GNP and the potential GNP.
• the total population and the employed population, multiplied by the GNP.