The Business Cycle: Part Two P285

Activities

1: The Reserve Bank of Australia lowers interest rates during a conraction because it should raise people's confidence in the economy.

2: One of the main causes of a recession/depression is the lack of consumer spending, and not the inability of the economy to produce goods and services.

3: A depression is a prolonged time of recession ie: economic downturn.

4: Money not spent on products mean that businesses cut back on production. This in turn cuts incomes within the business and ultimately jobs. If the business shuts down because of the loss of employees and money through the lack of buying products consumer confidence is shaken more, especially if the company is a bank and millions of dollars are waged on the bank's survival.

5: a) Inflation is at a very low level which means low economic growth.
b) Inflation is at a very high level which means a lot of economic growth, plenty of spending, and high interest rates.

6: The government's main role in the economy is to regulate the mature and level of economic activity for the nation as a whole.

7: a) up, down, down, down, down, down, down.
b) down, up, up, up, up, up, up.

8) A rise in consumer confidence often means that people are more willing to buy. This, with increased demand, means that manufacturers make more produce and therefore spend more, injecting money into the economy which results in a boom.



9) a) Expansion

b) During the 1950's and 60's the economy was mainly steady, with spikes in 1950 and 53, but overall during that period the economy was in a slow expansion.