Unit 14: The business cycle (unit review)

• Economic downturns lead to reduced consumer spending, decreased business investment —> lower demand for goods and services.

• As businesses struggle, they cut costs, including layoffs (n: cắt giảm nhân sự), resulting in increased unemployment.

1.Why does unemployment rise during the recession phase of the business cycle?

A recession: is a relatively short and mild (adj: nhẹ) economic downturn >< a depression is a prolonged and severe contraction with widespread unemployment and significant economic decline. Depressions are more intense and enduring (kéo dài) than recessions.

2. What is the difference between a recession and a depression?

- If a country is producing beyond its production possibilities curve, it is likely experiencing an expansion, where unemployment is significantly decreasing and inflation is increasing. This is typically an unsustainable period that leads to the peak where the economy starts slowly receding (v: lùi lại)

3. If a country is producing beyond its production possibilities curve, what phase of the business cycle is it most likely experiencing?

• During a downturn, the extent of government intervention in the economy varies, but common measures include fiscal and monetary policies. The government can increase demand by implementing stimulus packages (thực hiện các gói kích thích), investing in infrastructure projects, providing financial assistance to affected industries, and lowering interest rates to encourage borrowing and spending.

• The goal is to stimulate economic activity and create jobs. The level of intervention depends on the severity of the downturn and the government's economic policy objectives.

4. During a downturn, to what extent should the government intervene in the economy, by creating demand or jobs? How could it do these things?