Lesson 2.5.3

2.5.3 The trade (business) cycle Quiz: Pearson Edexcel Economics, Unit 2

20 questions

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Lesson 2.5.3, The trade (business) cycle: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 2: Theme 2: The UK economy – performance and policies, written with Revision Ninja.

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The 20 questions

  1. What does the trade cycle measure over time in an economy?

    • Tax revenue variations
    • Inflation rate changes
    • Exchange rate shifts
    • Real GDP fluctuations

  2. Which phase of the trade cycle immediately follows a recession?

    • Contraction
    • Trough
    • Peak
    • Boom

  3. Which economic feature is typical during a boom phase?

    • Low unemployment
    • High unemployment
    • Negative output gap
    • Falling real GDP

  4. How many consecutive quarters of falling real GDP define an economic recession in the UK?

    • Four quarters
    • Two quarters
    • One quarter
    • Six quarters

  5. Which term describes the lowest point of output in a cycle?

    • Trough
    • Boom
    • Recovery
    • Peak

  6. What shift in economic sentiment is most likely to trigger a downturn?

    • Increased investment spending
    • Rising export demand
    • Falling consumer confidence
    • Lower interest rates

  7. How does an economic recession typically affect a government budget deficit?

    • Widens the deficit
    • Balances the budget
    • Reduces national debt
    • Creates a surplus

  8. According to the accelerator theory, net investment depends on changes in which variable?

    • Interest rates
    • Money supply
    • Tax revenues
    • National output

  9. Which monetary policy change is most likely to trigger a boom in the trade cycle?

    • Increased tax rates
    • Reduced money supply
    • Lower interest rates
    • Higher interest rates

  10. What is a major reason why trade cycles are difficult to forecast accurately?

    • Fixed exchange rates
    • Predictable consumer spending
    • Constant interest rates
    • Unpredictable economic shocks

  11. What is an economy operating above its trend growth rate most likely to experience?

    • High cyclical unemployment
    • Demand-pull inflation
    • Excess spare capacity
    • Capital account deficit

  12. Positive real GDP growth immediately following a recession indicates which phase of the trade cycle?

    • Boom
    • Stagflation
    • Trough
    • Recovery

  13. Which policy measure is typically used by governments to stimulate an economy during a recession?

    • Higher interest rates
    • Reduced money supply
    • Increased income tax
    • Increased government spending

  14. What type of output gap is created when an economy enters a recession?

    • Zero output gap
    • Negative output gap
    • Positive output gap
    • Structural output gap

  15. How does cyclical unemployment typically behave during the boom phase of a trade cycle?

    • It reaches maximum
    • It stays constant
    • It falls
    • It rises

  16. Why can government macroeconomic policy not completely eliminate the trade cycle?

    • Targeted inflation rates
    • Unforeseen external shocks
    • Fixed tax rates
    • Balanced government budget

  17. What is the most likely impact of a negative output gap on inflation?

    • Higher inflationary pressure
    • Hyperinflation
    • Lower inflationary pressure
    • Constant inflation rate

  18. What term describes an economy slowing to sustainable growth without entering a recession?

    • Double-dip recession
    • Structural slump
    • Economic shock
    • Soft landing

  19. When actual GDP growth significantly exceeds the trend growth rate, what gap is formed?

    • Positive output gap
    • Spare capacity gap
    • Trade balance gap
    • Negative output gap

  20. How does business investment typically change during the boom phase of the trade cycle?

    • Becomes negative
    • Falls steadily
    • Increases significantly
    • Remains constant

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