As these occur in the economy, Income distribution, taxation and government expenditure are affected.
Consumer spending, employment, poverty rate and demographic change are the results of these cycles, Thu relationship between tax rates and income tax to the government is affected negatively during prosperity phase, It is therefore the duty of economists to outline the causes of the business cycles and this can be Justified using indicators.
QUESTION 1
1.1. Define business cycles.
1.2. Identify the FOUR phases in the diagram above by means of their numbers excluding the turning points.
1 3 Which phase generally occurs when there is a mild drop in spending?
1.4, The most severe downturn / downswing which is seen by some economists as an inevitable part of the economy is known as ...?
1.5. Which turning point marks the end of an economic prosperity and the start of contraction?
1.6. Which number in the diagram is used to show the peak point of a business cycle?
QUESTION 2. Analyse the cause of a business cycle according to interventionists approach.
QUESTION 3. Distinguish among the THREE economic indicators used in forecasting economic activities of the country (use one clearly labelled diagram to illustrate all indicators).
QUESTION 4. Analyse the effect of contraction phase to the vulnerable society.
QUESTION 5. Use GDP data below to explain the importance of moving averages in the forecasting of business cycles.
| YEAR |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
| GDP(bn) |
5 |
8 |
9 |
11 |
4 |
6 |
10 |