ECN 211 Exam 3 ASU Hill Questions with Complete Solutions

ECN 211 Exam 3 ASU Hill Questions with Complete Solutions 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